Entra Annual report 2011

Transcription

2011
1
Content
Company presentation
About Entra Eiendom
Statement by the Chief Executive Officer
Corporate governance
05
07
08
11
Presentation of the Board of Directors,
Directors’ report and declaration
Entra Eiendom’s Board of Directors
Directors’ report
Declaration by the Board of Directors and CEO
24
25
28
42
Consolidated financial statements
45
Annual financial statements for Entra Eiendom AS
99
Auditor’s report
125
Financial calendar 2012
127
Contact information
128
3
Entra Annual report 2011 Content
“Every day we work hard to meet our
customers’ expectations.”
About Entra Eiendom
5
Focused
Honest
Responsible
Ambitious
6
This is Entra Eiendom
Entra Eiendom is engaged in the
development, letting, management,
operation, sale and purchase of real
estate in Norway. Entra is one of
Norway’s leading property
companies, and is owned by the
Norwegian Government through the
Ministry of Trade and Industry. The
Group manages roughly one million
square metres of floor space.
Entra’s main purpose is to provide premises to meet central
government needs and to operate on commercial principles. In
addition, Entra can also serve municipal and private customers.
The Group’s business concept is to create value by developing,
letting and operating attractive, environmentally efficient
premises. The company’s vision is to enhance the efficiency and
reputation of its customers. Entra’s business goals are to be best
in terms of customer-perceived quality, to achieve profitable
growth, and to be industry leader in environmental efficiency.
The Group is divided into four regions: Central Oslo, Greater
Oslo, Southern and Western Norway, and Central and Northern
Norway. The Group has its head office in Oslo.
Property-related key figures at 31 Dec.
2011
2010
Estimated market value (NOK millions)
23 145
21 494
Total area (gross floor space)
1 214 181
1 206 178
Area under management (gross floor space) 975 951
965 516
Vacancy rate of the management portfolio
3.7 %
4.9 %
Weighted average remaining contract term (years)
9.9
10.6
Financial key figures at 31 Dec. 2011
2010
Profit before value adjustments and tax (EBVAT)
Net income from property management (NOK millions) Comprehensive income (NOK millions)
Total assets (NOK millions)
Equity ratio
468.4
1004.1
579.0
23 740
31.1 %
533.9
998.7
698.7
22 225.6
31.3 %
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Entra Annual report 2011 This is Entra EIendom
Statement by the Chief Executive Officer
2011 was an exciting and eventful year
for Entra Eiendom. Our main priority
areas were a strong customer focus,
forward-looking environmental efforts
and continued growth. Our hard work
paid off, as is reflected in the results.
2011 was a good year for Entra, with the signing of several
major contracts, as well as many exciting development projects.
I am especially pleased to be able to report that the Group
achieved historic results on two occasions in 2011. At yearend, the market value of the property portfolio was valued at
the record level of NOK 23.1 billion. In addition, the Group
achieved a profit from property management of over NOK one
billion for the first time in 2011.
One of Entra’s main goals is to be best in terms of customerperceived quality. In 2011, we used the Norwegian Tenant
Satisfaction Index for the first time to measure customer satisfaction. Entra achieved an overall score of 70, compared with the
national average of 66 in the industry. It is especially gratifying
to know that the customers perceive Entra as clearly better than
average on customer focus and environmental performance.
I would like to mention three projects we have worked on in
2011, which I believe are representative of the breadth and scale
of the work we do at Entra every single day. June saw the startup of the total renovation of our properties in Fredrik Selmers
vei 4 in Helsfyr in Oslo. The tenants are the Norwegian Direc-
torate of Taxes and SITS. Originally built in 1982, these buildings are going to be remodelled to the passive house standard,
energy class A and the environmental standard “BREEAM Very
Good”. To date, no commercial building has managed to achieve
this through remodelling. The tenants will have a modern building equipped to meet the standards of the future.
Established in April 2011, the Powerhouse Alliance is a collaboration between Skanska, Snøhetta architects, the environmental
organisation ZERO, the aluminium company Hydro, and Entra
Eiendom. This Alliance wants to build Norway’s first – and the
world’s northernmost – energy-positive commercial building. In
addition, the Powerhouse Alliance is also going to renovate two
office buildings at Kjørbo in Sandvika.
In Majorstua in Oslo, the 47-year-old premises of the Norwegian Water Resources and Energy Directorate (NVE), Middelthuns gate 29, is Norway’s first partially listed building to
be renovated to energy class B standards. One of the really big
challenges facing the industry is transforming existing buildings
to meet the standards we want in the future. The NVE building
is a unique, important landmark in the city.
These three examples are illustrative of Entra’s expertise when it
comes to taking care of our customers and providing modern,
future-oriented, highly eco-efficient premises. From 2010 to
2011, Entra managed to further reduce the company’s total
energy consumption from 208 kWh/sqm. to 202 kWh/sqm.,
i.e. energy savings of another 3 per cent. The total reduction in
the period 2006 to 2011 is an impressive 13 per cent. We want
to be a leader in the area of environmental efficiency because
this gives us an important competitive advantage, increases the
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Entra Annual report 2011 Statement by the Chief Executive Officer
attractiveness of our buildings and serves to enhance our tenants’
reputation.
In terms of market performance, Entra had an economic
vacancy rate of 3.7 per cent at the end of 2011. During the year
we signed lease contracts corresponding to a total annual rent
of NOK 118.2 million. The average remaining contract term
was roughly 10 years at the end of 2011, which is considerably
longer than the market average. Entra works systematically to
ensure it has long-term leases, financial strength and a balanced
risk profile.
Although the economic situation is still unsettled, the negative
trends we saw in the second half of 2011 appear to have
stabilised. The rental market has performed well in several places
in Norway, with prices rising for centrally located premises of a
high standard. We are confident that Entra will continue to
grow and develop.
I am very proud of the results we have achieved this year and
would like to thank all the employees for their dedication and
hard work. They have done a fantastic job and maintained a
constant focus on Entra’s strategic goals: to achieve profitable
growth, to be best in terms of customer-perceived quality and to
be industry leader in environmental efficiency.
Rune Olsø
Acting Chief Executive Officer
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“Our vision is to enhance the efficiency
and reputation of our customers.”
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Development
Marketing
Operation
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Entra Eiendom AS (Entra) is owned by
the Norwegian Government, which
exercises and manages its ownership
through the Ministry of Trade and
Industry.
Each year, Entra Eiendom AS’s
executive management and Board of
Directors review the company’s
corporate governance principles and
look at how they are executed.
Entra reports on the Group’s policies and practice for corporate
governance in accordance with section 3-3b of the Norwegian
Accounting Act and the Norwegian Code of Practice for Corporate Governance of 21 October 2010, including the amendments to the Code of 20 October 2011. There is further information about the Code of Practice published by the Norwegian
Corporate Governance Board (NUES) at www.nues.no.
There are some minor non-conformances with the recommendations. See the discussion under the individual sections below.
The reason for the non-conformances is that the Norwegian
state is the company’s only shareholder.
1. Corporate governance statement
Governance
The Ministry of Trade and Industry’s management of the company on behalf of the Government is based on generally accepted
principles of corporate governance and the distribution of roles
among the shareholders, the board of directors and the management under Norwegian company law. In addition, the Government has drawn up principles for good corporate governance,
which essentially coincide with NUES’s requirements relating to
transparency and information about the company.
The Norwegian Government’s ownership policy is summarised
in chapter 5 of the Government’s Ownership Report, Report
no. 13 (2010-2011) to the Norwegian Parliament (Storting).
For more detailed information about the Norwegian Government’s ownership policy, see www.regjeringen.no/nb/dep/nhd.
The shareholder appoints a Board of Directors to safeguard
the interests of the shareholder, as well as to ensure that the com-
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Entra Annual report 2011 Corporate governance
pany’s needs for expertise, capacity and diversity are met. The
Norwegian Government is a proactive shareholder with respect
to setting clear goals for the company. It is also important that
there are good systems in place for monitoring the company’s
finances, corporate social responsibility and ethical management.
Board of Directors and executive management
Entra’s overarching objectives and strategy are set by the Board.
The ethical guidelines and values adopted by the Board are
the foundation on which Entra’s activities rest. Guidelines,
procedures and authorisation structures can be found in Entra’s
quality system. The quality system consists of the steering documents that integrate strategy, goals and overall principles with
routines and documentation requirements for the administration
and business areas in the value chain.
The company is split into three business areas: projects/development, marketing and operation. The Group has administrative
and support functions for finance, strategy, communication and
human resources. Based on the authority granted to the CEO by
the Board, the CEO has implemented an authorisation structure
for the Group. Entra uses balanced scorecard as an important
tool for corporate governance. Based on the Group’s strategy,
various criteria for success and associated performance indicators
have been established, which together make up the company’s
balanced scorecard. Scorecards have been created for each business area and for the company’s support functions. The scorecards
include goals for corporate social responsibility and environmental standards in the Group. The balanced scorecard system
provides a basis for the executive management’s governance of the
Group and for reporting to the Board on operations.
Corporate governance (cont.)
Corporate social responsibility and the environment
State-owned companies face strict requirements regarding the
fulfilment of their corporate social responsibilities. Entra’s business concept includes the ambition to be the industry leader in
environmental efficiency, defining the targets for the Group’s
environmental work. Entra’s environmental strategy describes
the Group’s goals and areas of focus. Corporate social responsibility is an integrated part of Entra’s corporate governance.
Entra’s corporate social responsibility policy also applies to the
suppliers. The Board has adopted guidelines on socially responsible purchasing. The guidelines set constraints for the Group’s
purchasing activities, which must meet high ethical standards.
There must be a competitive bidding process in which all bidders
are treated equally. Through Entra’s membership in the Ethical
Trading Initiative, we have undertaken to further increase our
purchasing expertise and raise awareness about socially responsible purchasing. Requirements in relation to corporate social
responsibility and the environment must be clearly communicated to the Group’s suppliers. Both manufacturing processes and
finished products must meet defined environmental standards,
and the fundamental rights of workers must be respected by
all the links in Entra’s chain of suppliers. Entra’s environmental
criteria for suppliers and the document on socially responsible
purchasing are available on our website www.entra.no.
Ethical guidelines
The ethical guidelines set out how Entra’s stakeholders are to
be treated, what conduct is expected of employees, and provide
guidance and support on decision-making and problem solving.
Entra’s ethical guidelines support the company’s corporate social
responsibility activities and deal with topics such as health,
safety and the environment as well as business ethics, including
corruption and bribes. The company’s ethical guidelines are
available on www.entra.no.
Non-conformance with the recommendations: None
2. Activities
According to the company’s articles of association, Entra Eiendom AS can own, buy, sell, operate and manage real property,
and carry out other activities that are connected with this. The
company can invest in shares or ownership interests and participate in companies engaged in similar activities. The company
shall be run on commercial principles.
Entra has a clearly defined strategy, values and overall objectives. See www.entra.no for a more detailed description of the
company’s strategy. By developing, leasing out and managing
highly eco-friendly premises, the company shall add value.
The company’s growth strategy is based on profitable growth,
customer-focus and environmental leadership. The main focus
is the letting of office properties in the main towns and cities
where the company is already established.
3. Equity and dividends
Equity
Entra shall maintain enough equity to allow it to pursue its
goals and strategy, while reflecting the company’s risk profile.
At 31 December 2011, the Group had equity of NOK 7,391.4
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million, giving it an equity ratio of 31.3 per cent. The Group’s
financial strength is considered satisfactory.
Dividends
The Board proposes the dividend to the annual general meeting
(AGM). Section 20-4, subsection 4 of the Norwegian Companies Act states that the AGMs of state-owned companies do not
have to adopt the dividend allocations proposed by the Board
or corporate assembly. The AGM can determine the dividend in
accordance with Section 8-1 of the Norwegian Companies Act.
The shareholder has adopted a dividend policy for Entra Eiendom. The annual dividend shall constitute 50 per cent of the
Group’s profit after tax and non-controlling interests as calculated under the Norwegian Accounting Act and generally accepted
accounting principles, or be equivalent to at least two per cent
of book equity after non-controlling interests under IFRS at the
start of the financial year. The expected dividend from Entra
Eiendom is presented each year in the national budget.
The national budget for 2012 anticipates a dividend of NOK
137 million from Entra Eiendom for the 2011 financial year.
Capital increases and share buybacks
The Board is not authorised to raise new capital or to buy back
company shares.
4. Equal treatment of shareholders and transactions with
related parties
All of the shares in the company are owned by the Norwegian
Government through the Ministry of Trade and Industry, and
there is only one class of shares. The section in the recommendations about deviating from the pre-emptive rights of shareholders during capital increases is not relevant to the company.
Entra considers it important to be transparent and conservative
in relation to transactions where there might be a perception
that there is a conflict of interest between the company and a
Board member, key employee or closely related parties of any of
these. The guidelines for the Board regulate the Board members’
duty to report any other directorships, roles, possible conflicts
of interest and related parties. The guidelines for the Board
state that Board members and the CEO cannot participate in
discussions or decisions on issues that affect them personally or
affect a related party, where they consequently have a significant
personal or financial interest in the outcome of the matter. The
Board has also adopted a policy for transactions with related
parties, describing the rules and routines for these types of
transactions.
The company has a number of public-sector tenants. Lease contracts with them have been signed on commercial terms.
wholly owned by the Norwegian state, this requirement is not
relevant.
In the Government’s Ownership Report, Report no. 13 (20102011) to the Storting, the Government indicates that it may
permit the company to finance its equity capital needs in the
private market. This may entail a government sell-off as part of a
structural transaction and/or initial public offering. The Government therefore requested authorisation from the Storting to list
and/or sell up to two-thirds of the shares in Entra Eiendom AS.
On 9 June the Storting adopted a resolution to authorise the
Government to reduce its ownership interest in Entra down
to 33.4 per cent in connection with a sell-off and/or initial
public listing of the company. Before any sell-off and/or initial
public offering takes place, the Government will review whether
individual buildings in Entra’s portfolio should be taken over by
Statsbygg on commercial terms.
6. Annual General Meeting
Section 20-5 of the Norwegian Companies Act regulates the
AGM of state-owned companies. At wholly state-owned companies, the ministry that owns the company is responsible for
sending out notice of AGMs and EGMs.
5. Free negotiability
According to the recommendations, the company’s shares
should be freely negotiable. However, since Entra Eiendom AS is
Notice, agenda and relevant documents
The Ministry that owns the company determines when the
Annual General Meeting shall be held. Entra’s executive
management prepares the agenda and other documents and is
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r esponsible for sending out notice of the meeting, stating what
items are on the agenda. The notice is sent to the shareholder,
the Chair of the Board, the company’s auditor and the Office
of the Auditor General of Norway. Entra Eiendom AS does not
have an election committee, and the sections of the recommendations on election committees have therefore not been
followed.
In 2011 the deadline for registering for the AGM was set as close
as practicably possible to the AGM.
Chair of meeting
The Chair of the meeting is elected by the AGM. The Chair of
the Board chaired the AGM in 2011.
Attendance
The Ministry of Trade and Industry represents the shareholder at
the AGM and participation can only take place by attendance.
This is because Entra only has one shareholder. As a minimum,
the Chair of the Board of Directors shall attend the AGM on
behalf of the Board. The Board’s participation at the meeting is
agreed with the shareholder. The company’s auditor shall always
attend the AGM. The Office of the Auditor General is entitled to
attend, and made use of that right in 2011. The executive management is represented by the CEO, CFO and Deputy CEO.
Non-conformance with the recommendations: For the sections of
the recommendations that are relevant to the company, there is only
one minor non-conformance. The non-conformance is related to the
participation of the entire Board at the company’s AGM.
7. Election committee
Entra Eiendom does not have an election committee. Board
members are appointed by the shareholder.
Non-conformance with the recommendations: The company does not
have an election committee, as Board members are appointed by the
shareholder.
8. Corporate assembly and Board, composition and
independence
Entra Eiendom does not have a corporate assembly.
Composition and independence of the Board of Directors
According to the company’s articles of association (§5), the
Board shall have between five and seven shareholder-elected
members. In addition, there were two employee representatives
on the Board in 2011. The shareholder elects the shareholderelected members, including the Chair, through the AGM. The
shareholder-elected members sit for a period of two years and
were most recently elected/re-elected at the 2010 AGM. At
the 2011 AGM, the Board was expanded to include two more
shareholder-elected members, who were elected for one year.
Board member Åse Koll Lunde left the Board at the end of
2011, as a result of a change in employment. At 31 December
2011, the Board had six shareholder-elected members, two of
whom are women.
The employee representatives are chosen by and among the
employees, and sit for the same length of time as the shareholder
elected members.
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One of the two employee representatives on the Board is a
woman(1). The overall expertise, capacity and diversity of the
Board makes a positive contribution to the ability of the company to add value. No representatives of the Group’s executive
management are Board members. None of the members of the
Board supply services to the Group, and the Board is independent of the company’s executive management, main business
partners and shareholder. The CVs of the Board members are
included in the annual report.
Non-conformance with the recommendations: There is no need for
Entra Eiendom AS to have a corporate assembly, as the company has
fewer than 200 employees. It is also impossible for Board members to
own shares in the company, as the company is wholly state-owned.
9. The work of the Board
The tasks of the Board
The Board has overall responsibility for the supervision and
management of Entra Eiendom AS and shall ensure that the
company is properly run. The Board has drawn up guidelines
that govern its own activities and procedures.
Amongst other things, the Board shall prepare plans and budgets
for the Group’s activities and keep informed about its financial
position and performance. Each year, the strategy and overall
objectives for the Group are reviewed. The Board checks that the
company has sufficient capital in view of the scope of its activities and the associated risks, and that its activities are subjected
to adequate control.
(1)
e Board was expanded in February 2012 with one more employee
Th
representative in accordance with section 6-4 of the
Norwegian Companies Act.
The Chair of the Board chairs Board meetings. The Board has
chosen a Vice-chair who chairs meetings when the Chair cannot
or should not lead the work of the Board. A thematic plan for
the Board’s work for the year has been established. Based on the
annual plan, the Chair of the Board – in consultation with the
company’s CEO – adopts the final agenda for the Board meeting. They emphasise the importance of good preparation for
Board meetings and of allowing all Board members to take part
in decision-making procedures. The CEO, CFO and Deputy
CEO shall attend all Board meetings. The company’s auditor
attends when the annual financial statements are adopted or on
other occasions where the auditor’s expertise is relevant.
The Board has adopted guidelines that regulate the CEO’s tasks
and relationship with the Board. At Board meetings, the CEO
reports on the status of the company’s operations, including the
risk matrix and risk assessments, and scorecards showing developments in relation to the Group’s most important goals.
Each year the Board assesses its own work and way of working
as a basis for assessing the need to make changes and improvements. This assessment includes an evaluation of the Board’s
expertise, collectively and for each member, and how well the
Board works as a team. The results of the evaluation are presented to the shareholder.
Sub-committees
The Board has established an audit committee and a compensation committee. The Board has stipulated mandates for the work
of the committees. The mandates are subject to annual revision.
In accordance with their respective mandates, the audit com-
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mittee and the compensation committee shall have two or three
shareholder representatives from the current Board of Directors.
The representatives are elected by the Board for two years at a
time, to coincide with the Board’s term of office. The committees assist the Board with preparing its work, but decisions are
taken by the whole Board.
The audit committee has relevant expertise in accounting and
auditing. The audit committee helps the Board to carry out
a thorough assessment of issues relating to financial reporting, internal controls and risk management. The Board’s audit
committee makes sure that the Group has an independent and
effective external auditor. The audit committee also makes sure
that the Group has adequate internal controls and procedures
for compliance with laws and regulations.
The CEO, CFO, committee secretary and the company’s audi
tor shall always attend audit committee meetings. The audit
committee has established a calendar of meetings, and meets
seven times a year. Separate meetings are held to discuss important matters related to the annual financial statements, internal
controls and business management. The committee performs an
annual evaluation of its own work.
The compensation committee assists the Board with all matters
relating to employment conditions, pay and any severance
payments to the CEO. The CEO consults the compensation
committee in connection with determining the salaries of the
senior management team.
The CFO, who has the overall HR responsibility, shall always
attend compensation committee meetings. The CEO attends as
necessary. The committee normally meets two to four times a
year. The compensation committee held three meetings in 2011.
10. Risk management and internal controls
The Board is responsible for ensuring that the company,
financial reports and asset management are subject to adequate
control. Risk management at Entra shall support the Group’s
strategic and financial goals and help the Group avoid events
that may have an adverse impact on the Group’s operations and
reputation. Risk management and internal controls are described
in Entra’s quality system.
Entra works systematically to ensure continuous improvement of
its internal controls linked to financial reporting. The Group has
a proactive approach towards risk management, and potential
risks shall be identified, assessed, quantified and managed. The
executive management has established routines for managing
the exposure to risk entailed by Entra’s activities. The following risk classes have been defined: investment risk, project risk,
market risk and financial risk. Investment risk is taken into
account when calculating profitability (required rate of return
and cash flow) at the time of investment. Project risk is managed
continuously over the course of projects by monitoring progress,
finances and contractual issues. Market risk, which relates to
signing and renegotiating lease contracts, is continuously monitored. The Group’s financial risk is managed in accordance with
the adopted finance policy, and financial instruments are used to
limit risk exposure.
Reporting
In conjunction with the executive management’s reviews of the
company’s operations, risk matrices are drawn up within each
business and support area to provide an overall picture of the
Group’s exposure to risk within the defined risk classes. The
Group’s financial status is monitored by reviews of the accounts
compared with the budget and projections, and performance is
reported using the balanced scorecards in all the business and
support areas. The Group has established systems for managing
and monitoring issues related to health, safety and the environment as an integrated part of its management reporting.
The Board is informed of the Group’s risk exposure at each Board
meeting. The management’s risk assessments and the information
that they provide about corrective measures put the Board in
a good position to judge whether the company’s risk management procedures are satisfactory. Risk management and internal
controls are also discussed by the Board’s audit committee.
Monitoring and control of financial reporting
Procedures have been established for financial reporting that
involve carrying out a high-level review of significant estimates,
provisions and accruals in conjunction with preparing the
quarterly and annual financial statements. Separate notes to the
accounts are prepared for significant accounting items, nonroutine transactions and periodic provisions, which are approved
by the CFO. The valuation of the company’s properties is
subject to a separate review and assessment at management level
at the close of each quarter. This involves holding meetings with
the external valuers, with a particular focus on discussing perceptions of the market, risk premiums and documentation. Actual
18
financial performance is monitored against the budget each
month, and projections are updated on an ongoing basis.
All the balance sheet items are reconciled and documented at
the close of each quarter. Balance sheet items such as liabilities,
bank deposits, projects and non-current assets are subject to
special reviews. Projects are reviewed on a quarterly basis by the
project and accounting departments together to assure the quality of the accounting and calculation of tax. System-generated
items linked to liabilities and interest rate hedging are subject
to manual reconciliation each month. Significant profit and
loss accounts and tax-sensitive accounts are subject to manual
reconciliation each quarter. All reconciliations are reviewed and
quality assured.
The Group’s interim and annual financial reports are reviewed
by the audit committee before they are given to the Board. The
audit committee reviews the external auditor’s management letter, as well as the findings and assessments of audits in conjunction with interim and annual reports. Significant issues in the
auditor’s report are presented to the Board.
Financial management
The Group is managed by means of financial targets linked to
the management of the debt portfolio and the return on the
property portfolio and equity. Profitability calculations are performed in connection with purchasing property and start-up of
building projects, using a fixed calculation method and required
rate of return. The current fair value of building projects is
monitored throughout the entire course of the project.
Long-term projections are made of financial developments as a
component in the Group’s risk management, using a model with
detailed assumptions concerning the Group’s financial performance, cash flow and assets. The projections take into account
cyclical developments in the economy, financial parameters and
the property market. Scenarios and simulations are developed
for various different development life cycles. The simulations
provide good information for the Board and the executive management in their monitoring of developments in central balance
sheet figures and cash flow.
Allocation of capital and risk profile are important parameters
for financing activities. The Group’s finance policy contains
guidelines for the day-to-day management of the Group’s
financial risk. Principles have been defined for borrowing,
management of liquidity risk and interest rate risk, and credit
and counterparty risk. The Group’s model for financial projections yields up-to-date key figures, which are monitored on a
continual basis. There is monthly reporting to the management
in accordance with the management guidelines for the financing
activities, and to the Board through the business report.
There is systematic monitoring of the general economic situation and how this affects the Group’s financial risk. Based on
expected developments in the economy and analysis of the
Group’s financial position, expected developments in both short
and long interest rates, the strategy for interest rate positioning,
capital needs and planned financing activities are discussed, as
well as opportunities in the financing market.
19
to are being adequately managed and monitored. The quality
department carries out internal audits in accordance with the
plan approved by the Board. The results are presented to the
audit committee and the Board on an annual basis. If necessary,
the company’s quality manager can report directly to the audit
committee, and the Board.
The quality department performs operational audits. Examples
of audit tasks include verifying that the Group’s purchasing
processes are in compliance with the defined purchasing routines
and authorisations, checking compliance with the investment
routines for projects, documentation of property transactions,
supplier audits and other tests linked to the company’s authorisation structure.
See the description in the annual report for a more detailed
presentation of the Group’s financial position and risk.
Monitoring of risk management and internal controls
As part of the Group’s internal control system, Entra has
established a quality department that performs internal auditing
with the aim of assisting the Board and the management in their
assessments of whether the main risks the Group is exposed
Follow-up of the ethical guidelines and socially responsible
purchasing
Issues linked to ethics and corporate social responsibility are
included in the company’s internal control plan and the mandate of the quality department. The environmental perspective
is an integrated part of the assessments made in connection with
potential investments, for example. Special requirements have
been defined for Entra’s suppliers in the document “Socially
responsible purchasing”, and a supplier verification is conducted
each year to ensure that the Group’s suppliers are familiar with
and adhere to the contractual conditions.
Entra’s requirements regarding corporate social responsibility in
the supply chain are followed up by means of a supplier audit
conducted by external consultants. The audits focus on the
implementation at suppliers of Entra’s standard requirements
20
in relation to corporate social responsibility, such as purchasing
processes, environmental standards and waste management, as
well as checking that pay, working and living conditions are in
accordance with all the relevant laws and regulations.
Internal controls linked to Entra’s core values, ethical guidelines
and corporate social responsibility are under constant development and are implemented on an ongoing basis.
The company’s quality manager is the addressee of and follows
up non-compliance notifications submitted via the Group’s
reporting system. The ethical guidelines lay down how
employee’s can report breaches of Entra’s ethical guidelines or
legislation, and this information is also available on the Intranet.
Employees are encouraged to report unsatisfactory situations. In
addition to internal reporting, the company has also established
an external reporting channel to a law firm, who can receive
notifications on behalf of the Group.
11. Remuneration of the Board
Each year, the AGM determines the remuneration of the Board.
For information about remuneration of the Board in 2011, see
Note 24 to the financial statements. The remuneration of the
Board is not performance related, and no options have been
issued to Board members.
For a discussion of the Board’s independence, see Section 8.
12. Remuneration of key employees
Guidelines for determining salaries and remuneration
With effect from 1 April 2011, the Government’s guidelines
concerning the State’s position on senior executive remuneration
in State-owned companies from 2006 were replaced with new
guidelines, issued in connection with Report no. 13 (20102011) to the Storting “Active ownership” and appendix no. 1
“Guidelines for terms of employment for senior executives in
state-owned enterprises and companies”. The primary objective
of the guidelines is to ensure that senior executive remuneration
levels within companies with a State shareholding are competitive, but not above those of other similar companies. The companies shall promote moderation in executive pay. The principal
element in the remuneration of senior executives should be the
fixed basic salary. The guidelines also lay down that the sum
total of the individual components in a pay package must be
assessed as a whole, including fixed basic salary, any variable pay
and other benefits such as pensions and severance pay. It is the
responsibility of the entire Board to adopt guidelines for the
compensation of senior executives.
The Board’s statement concerning executive remuneration
The AGM of 27 June 2011 adopted an amendment to the Articles of Association of Entra Eiendom AS to ensure compliance
with the Government’s revised guidelines on remuneration of
senior executives. Effective from the 2012 Annual General Meeting, the Board shall submit a statement on the determination of
salaries and other remuneration of senior executives. Note 24 to
the consolidated financial statements contains the statement and
information about the compensation paid to each member of
the executive management.
Determining salaries and remuneration
The Board assesses the CEO’s terms and conditions of employment once a year in light of a recommendation from the Board’s
compensation committee. The CEO consults the compensation
committee in connection with the annual determining of the
salaries of the Group’s senior management team. See the presentation of the compensation committee in Section 9.
The CEO has an additional pension plan as part of his employment contract from 2008. This pension scheme is a continuation of a pension agreement with a former employer. This
scheme does not comply with the Government’s guidelines on
remuneration of senior executives. All other elements related to
remuneration are in line with the guidelines.
The CEO has a personal performance-related pay scheme with
an upper limit of 50 per cent of his annual salary. The targets
defined each year as part of this scheme are linked to the Group’s
targets for its operations. The performance-related pay scheme is
based on objective, definable and measurable targets over which
the CEO for the most part can exert an influence. The Board
finds that the CEO’s total remuneration is in keeping with the
main principle of the Government’s guidelines that senior executive remuneration levels shall be competitive, but not above
those of other similar companies.
The other members of the management group have a similar
performance-related pay scheme, with an upper limit of 25 per
cent of their annual salaries. There are no share option schemes
for key employees.
21
The company-wide performance-related pay scheme is linked to
defined targets for the Group related to return on equity, owner
costs, achieved rents, occupancy rate, customer satisfaction and
energy consumption, as well as defined individual goals. The
degree to which Entra achieved its goals over the course of the
year can be seen from the Group’s corporate governance system.
The total performance-related pay within this scheme in any
given year can total no more than one month’s salary.
After consultation with the compensation committee, the CEO
has been authorised to give employees who are not part of the
management group bonuses over and above the company-wide
performance-related pay scheme. However, the total bonus can
never exceed 25 per cent of the annual salary of the employee.
13. Information and communication
Financial reporting and communication
The financial statements are prepared in accordance with the
International Financial Reporting Standards (IFRS). Reporting must fulfil statutory requirements and provide sufficient
additional information to allow Entra’s stakeholders to form
as accurate a picture of the business as possible. The financial
calendar is published on Entra’s website, and is also stated in the
Group’s annual report. Entra Eiendom AS has publicly traded
bonds, and its reporting conforms with the rules of the Securities Trading Act, as well as with the requirements specified by
Oslo Børs for company’s with listed bonds. The Group publishes
interim figures and its annual results through stock exchange
notices and press releases.
Dialogue with shareholders
Regular meetings must be held with representatives of the
shareholder and company at which the annual and interim
accounts are presented. The CEO, CFO and Deputy CEO
always attend on behalf of the company. In addition, there are
regular meetings between shareholder representatives, the Chair
and the CEO.
14. Acquisition
The company is wholly owned by the Norwegian Government
through the Ministry of Trade and Industry. The owner cannot
sell shares in the company without special authorisation from
the Norwegian Parliament (the Storting).
Non-conformance with the recommendations: Section 14 of the
recommendations is not considered relevant to the company.
15. Auditor
Plan for the auditor’s work
Each year the auditor presents a plan for his work to the audit
committee, which in turn informs the Board of its most important aspects.
Auditor’s relationship to the Board
The auditor attends meetings of the audit committee, as well
as Board meetings to review and adopt the annual report and
financial statements. The auditor also attends Board meetings
when other matters for which the auditor’s expertise is relevant
are being discussed. There are two annual meetings between the
audit committee and the auditor, and one meeting between the
whole Board and the auditor, which is not attended by representatives of the executive management.
Auditor’s review of the company’s internal controls
When presenting the results of the interim audit to the audit
committee and Board, the auditor focuses on the company’s
internal controls, identified weaknesses and proposals for
improvements. The auditor summarises the findings and
assessments of the interim audit in a letter to the company’s
executive management, which is copied to the chair of the audit
committee.
Auditor’s independence
Each year the auditor’s independence is assessed by the audit
committee. The Board has drawn up guidelines on the use of
the external auditor, governing what work the auditor can do for
the Group in view of the requirement for independence. Any
major tasks other than statutory audits shall be approved by the
audit committee in advance. The management group informs
the audit committee of any additional services supplied by the
external auditor under a fixed item on the agenda at meetings.
Annual General Meeting
The auditor attends the AGM in conjunction with the discussion of the annual report and financial statements. The auditor’s
fee for statutory auditing and other services is approved by the
AGM.
22
“Being responsible is one of our
most important values”
Presentation of the Board of Directors,
Directors’ report and declaration
24
Entra Eiendom’s Board of Directors
Chair of the board
VICE-CHAIR
board member
board member
Grace Reksten Skaugen
Chair since 2004
Martin Mæland
Vice-chair since 2007
Finn Berg Jacobsen
Board member since 2004
Ida Helliesen
Job title: Self-employed consultant.
Job title: CEO of OBOS.
Job title: Consultant (own company).
Educational background: PhD in
laser physics from Imperial College
of Science and Technology at the
University of London and MBA from
BI Norwegian Business School.
Educational background: Cand.mag.
and cand.oecon. from the University
of Oslo.
Educational background:
Government-authorised auditor,
business degree (Siviløkonom) from
the Norwegian School of Economics
and Business Administration (NHH)
and MBA from Harvard Business
School.
Job title: Has held various positions
at Norsk Hydro and the Ministry of
Finance; most recently CFO at Norsk
Hydro.
Other directorships: Chairs the
board of Ferd AS. Member of the
boards of Statoil ASA, Investor AB
and the Norwegian Institute of Board
Members.
Other directorships: Chairs the board
of Veidekke ASA. Member of the
boards of Fornebu Utvikling ASA and
Terra Boligkreditt AS.
boards of Arctic Securities ASA and
FBJ-Consulting AS. Member of
the boards of Aker ASA, Oslo Asset
Management ASA, Norron Asset
Management AB, Eneas Holding AS,
Hvamveien 5 ANS, Industriveien ANS
and Strømsveien ANS.
25
Entra Annual report 2011 Entra Eiendom’s Board of Directors
Educational background: Business
degree (Siviløkonom) from the
Norwegian School of Economics and
Business Administration (NHH).
Other directorships: Norges Bank,
Aker Solutions and Skagerak Energi.
board member
board member
board member
board member
board member
Ottar Brage Guttelvik
Ketil Fjerdingen
Job title: County Director for Møre
og Romsdal.
Job title: Investor.
Tore Benediktsen
Employee representative
Mari Fjærbu Åmdal
Frode Erland Halvorsen
Job title: Operations manager at
Entra Eiendom, Southern and Western
Norway Region.
Job title: Technical manager at Entra
Eiendom, Southern and Western
Norway Region.
Job title: Operations manager,
Central Oslo Region.
Other directorships: None.
Educational background: Master of
Science in Engineering (Siv.ing.)
Educational background: Business
degree (Siviløkonom) from the
Norwegian School of Economics and
Business Administration (NHH) and
further studies in political science
and public administration from the
Norwegian Municipal and Social
College (NKSH).
boards of Fylkeshuset AS and
Fylkeshuskantina AS. Member of the
boards of the Norwegian Institute for
Urban and Regional Research (NIBR)
and the regional theatre in Møre og
Romsdal, and member of the control
committee and supervisory board of
Eksportfinans ASA.
Educational background:
Government-authorised auditor,
postgraduate public accounting degree
from NHH, registered auditor from
Trondheim College of Economics and
Business Administration, and studied
economics and business administration
at Trondheim College of Economics
and Business Administration.
boards of Fredriksen Sønn AS,
Langøya Invest AS, Vågar AS,
Helga den Fagres gate 12 AS,
Vågar Drift AS, BK Eiendom AS,
HF-Invest AS, TF-Invest AS and
Rykket Eiendom AS. Member of the
boards of Svolvær Havn AS, Vågar
Utvikling AS, Vågar Havn AS and
Litek Eiendom AS.
Other directorships: None.
26
Entra Annual report 2011 Entra Eiendom’s Board of Directors
Other directorships: Head,
Norwegian Civil Service Union (NTL)
Entra Eiendom.
Solid property
management
and good progress
in the project portfolio
27
Directors’ report
Solid and efficient operations
throughout 2011 led to the Group
achieving a profit from property
management of over one billion
kroner. The pre-tax profit for 2011
came to NOK 805.6 (947.1) million, a
decline that is largely due to higher net
financial expenses and reduced
contributions from partly owned
subsidiaries.
The market value of the property portfolio as a whole rose by
NOK 1.6 billion to NOK 23.1 billion. The Group has worked
on planning of major development projects throughout the year,
and there has generally been good progress in the project portfolio. At year-end, the Group manages over one million square
metres of floor space, including the project portfolio.
The economic vacancy rate for property in the management
portfolio was 3.7 per cent.
About Entra Eiendom
Entra is engaged in the development, letting, management,
operation, sale and purchase of real estate in Norway. Entra is
one of Norway’s leading property companies, and is owned by
the Norwegian Government through the Ministry of Trade and
Industry.
Entra’s main purpose is to provide premises to meet central government needs, and to operate on commercial principles similar
to those of private enterprises in the industry. The Group has
both public and private sector customers, with a main focus on
commercial property. The largest customer group is public-sector
tenants, who make up 80 per cent of the Group’s customers.
The Group’s business concept is to create value by developing, letting and operating attractive, environmentally efficient
premises. The company’s vision is to enhance the efficiency and
reputation of its customers. Entra’s business goals are to be best
in terms of customer-perceived quality, to achieve profitable
growth, and to be industry leader in the area of environmental
efficiency. As part of its operations, Entra works to find innova-
28
Entra Annual report 2011 Directors’ report
tive solutions to save energy and improve the environmental
efficiency of its properties.
Entra is organised into four regions: Central Oslo, Greater Oslo,
Southern and Western Norway, and Central and Northern
Norway. The head office is in Oslo, and the regional offices are
located in Bergen and Trondheim.
Operations in 2011
Strategy
In 2011 the Board reviewed the Group’s strategy, including
the targets for profitable growth, customer perceived quality
and environmental efficiency. Entra continuously assesses the
opportunities in the property market, particularly in terms of
our priority areas and property segments. The Board has also
reviewed Entra’s plans for the Tullinkvartalet neighbourhood in
Oslo, and the opportunities to develop an environment-friendly,
secure datacenter through the Greenfield Datacenter project.
The transaction market
The growing uncertainty about future developments in the Norwegian and international economy has affected the Norwegian
interest rate and credit market in 2011 and has impacted the
transaction market. Commercial property worth approx. NOK
30-35 billion changed hands in Norway in 2011, representing a
slight downturn from 2010. Demand was highest for properties
in good locations with a reliable cash flow.
In keeping with its market strategy, Entra has bought and
sold properties in 2011. In autumn 2011, Entra acquired the
development property Lakkegata 55/Heimdalsgata 13 in Oslo
Directors’ report (cont.)
through takeover of the shares in Brødrene Sundt Verktøimaskinfabrik AS. Through purchase of the shares in Karoline
Kristiansens vei 2 AS, Entra took over a section of the Fyrstikk
torget precinct in Helsfyr in Oslo. Entra has also signed a
contract to buy Universitetsgaten 7-9 in Oslo, with handover in
2012. All these properties are in areas where Entra already has
several properties and where the company wants to grow.
The company has continued to sell properties that no longer fall
within the Group’s main priority areas, with three transactions
being completed in 2011: Langbrygga 1 in Skien, Storgaten 51
in Tønsberg and Gamle Kragerøvei 9 in Kragerø.
In the second quarter, Entra’s wholly owned subsidiary Ribekk
AS (formerly Optimo AS), sold its 58.3 per cent holding in
Optimo Prosjekt AS.
In December Entra Eiendom AS accepted an offer on its 33.75
per cent shareholding in Kunnskapsbyen Eiendom AS, with
transfer of the shares to the new owner in the first quarter of
2012.
Rental market
The general trend in rents in Central Oslo has been a slight,
gradual increase over the year, whereas rents in the office markets
outside the city centre have remained flat. Rental activity is
somewhat lower than in 2010, but activity started to pick up
again in the last quarter of 2011. The office vacancy rate is
roughly 7 per cent.
Rents in Bergen have remained relatively stable throughout the
(1)
year. Demand is good for modern office premises. The office
vacancy rate was roughly 6.25 per cent in 2011 and is expected
to rise slightly as a result of completion of a number of newbuild projects.
Growth in the oil industry and the low supply of new buildings
has contributed to a good rental market in the Stavanger area
with rising prices. The office vacancy rate is down to almost 4
per cent.
At the close of 2011, the Group controlled 976,000 square
metres spread across 106 properties. The average remaining
contract term is 9.9 (10.6) years. In 2011 Entra signed lease
contracts corresponding to a total annual rent of NOK 118.2
million and 79,000 square metres, with the most important
individual contracts being:
•
In Trondheim, rents for high-standard offices in attractive locations have increased slightly over the year. Activity in the rental
market has remained stable at a good level. The rise in the supply
of new office space is expected to lead to an increase in vacancy
in the future.
•
In 2011, Entra achieved a positive trend in rents in connection
with renegotiations and the signing of new contracts. In keeping with the general developments in the market, the trend in
achieved rents was most positive in and around Oslo.
•
•
•
•
•
The proportion of vacant space in Entra’s portfolio remained
stable throughout the year, and the Group had an economic
vacancy rate of 3.7 (4.9(1)) per cent at 31 December. Vacancy was
highest in the Greater Oslo region (Helsfyr-Bryn, Drammen,
Bærum, Skedsmo and Østfold), with an economic vacancy rate
of 6.5 per cent, and lowest at 2.1 per cent in the region Southern and Western Norway (Kristiansand, Stavanger and Bergen).
The Central and Northern Norway region (Trondheim, Bodø
and Tromsø) had an economic vacancy rate of 2.5 per cent, and
Central Oslo had 3.1 per cent vacancy at the end of 2011.
The vacancy rate in 2010 is based on area, corresponding to 4.8 per cent at the end of 2011.
29
Kristiansand Municipal Authority, Kongsgård Allé,
Kristiansand, 12,174 square metres
Bærum Municipal Authority, Øvre Torv 1, Bærum,
10,500 square metres
The Norwegian Public Roads Authority, Spelhaugen,
Bergen, 9,100 square metres
NAV National Office for Social Insurance Abroad,
Hagegata 23, Oslo, 6,012 square metres
Oslo Cancer Cluster, Cort Adelersgt. 30, Oslo,
4,802 square metres
The Norwegian Hydrographic Service, Lervigsveien 36,
Stavanger, 4,792 square metres
Vestre Viken Hospital Health Authority, Konggata 51,
Drammen, 3,542 square metres
Customer satisfaction
One of Entra’s main business objectives is to be best in terms of
customer-perceived quality. A high degree of customer satisfaction promotes greater stability in the customer base. In 2011,
the Norwegian Tenant Satisfaction Index was used for the first
time to measure customer satisfaction. Entra achieved an overall
score (CSS) of 70, against the national average of 66 in the
industry. It is good to know that the customers perceive Entra as
clearly better than average on customer focus and environmental
performance.
Projects under development
In 2011 the company invested NOK 1,139 million in newbuilds and renovation projects, and the following major projects
were completed:
• P
rofessor Olav Hanssens vei 10 (second construction phase),
Stavanger
• Middelthunsgate 29, Oslo
• Hagegata 23, Oslo
• Malmskriverveien 4, Sandvika
• Pilestredet 28, Oslo
• Konggata 51, Drammen
At the close of 2011, Entra had 12 properties in its project portfolio, with a combined area of 110,000 square metres. Renovation has started of some 32,000 square metres in Fredrik Selmers
vei 4 in Oslo. The building is due for handover to the Directorate of Taxes in 2013, and will meet the requirements of energy
efficiency class A. In Stavanger, work has started on the third
phase of Professor Olav Hanssens vei 10, and on the project in
Lervigsveien 36. Both projects will be completed in 2012.
Environment and urban development
As part of its corporate social responsibility, Entra has further
developed and increased its work on the environment and urban
development in 2011.
In 2011, Entra joined the Powerhouse Alliance, which is a
collaboration between the construction company Skanska,
Snøhetta architects, the environmental organisation ZERO,
the aluminium company Hydro, and Entra Eiendom. In June,
the Powerhouse Alliance launched its plans to build Norway’s
first – and the world’s northernmost – energy-positive newbuild at Brattørkaia in Trondheim, and the work on designs and
solutions has come a long way. Powerhouse is also planning to
remodel two office buildings from 1980 at Kjørbo in Sandvika.
The ambition is that the office blocks will be the northernmost
energy-positive renovated office buildings in the world and will
produce more energy than they consume.
Entra has significantly stepped up its environmental efforts
in 2011. Entra wants to be perceived as the industry leader in
environmental efficiency by its customers, suppliers and partners. The environmental strategy is well integrated at all levels
in the Group, and the environmental targets are monitored
through the balanced scorecard system. Entra’s environmental
strategy also provides a framework in relation to the Group’s
market positioning and business development. In contrast to
traditional “economising” strategies in business, environmental thinking means looking ahead to the future and adopting
a wider, more long-term life-cycle perspective. Through its
development and renovation projects, as well as in the ongoing
operation of its properties, Entra seeks to influence the market’s
conditions and requirements regarding the environmental
efficiency of buildings. From 2010 to 2011, Entra reduced the
specific energy consumption of its properties by 6 per cent,
equivalent to 7.65 GWh per year. The Group had an average
energy consumption, adjusted for temperature variations,
30
of 202 kWh per square metre in 2011, compared with its target
of 206 kWh. This corresponds to an 11 per cent reduction in
carbon emissions compared with 2010.
In autumn 2011 Entra was the first property company in
Norway to introduce special green “win–win” agreements. The
agreements commit the tenant and Entra to a binding cooperation on measures to enhance the environmental performance
of the premises. Entra’s role is to identify and fund appropriate
measures. The tenant will enjoy lower waste management and
energy costs and pays for the measures through the rent. The
County Governor of Hordaland was the first customer to enter
into a green win–win agreement with Entra. A total of 15 green
win–win agreements were signed in 2011.
Entra’s involvement in Sandvika, where it is developing a
new learning centre at Øvre Torg, is an important part of the
“Kunnskapsbyen Sandvika” project to develop Sandvika as a
centre of learning and education and will help revitalise the old
Sandvika town centre. The renovated building will be ecofriendly and energy efficient with additional insulation of existing façades and roofs, low-energy windows and new technical
installations.
Part-owned subsidiaries
Brattørkaia AS (52 per cent) is developing and building Brattørkaia in Trondheim. The company had a busy year in 2011.
Building work has started on Brattørkaia 15, with the construction of 14,000 square metres of environmentally friendly office
premises that meet the requirements of energy efficiency class
A for the Norwegian Directorate for Nature Management.
31
Through the Powerhouse Alliance, work has started on an
outline proposal for the property Brattørkaia 17A, where the
Alliance is planning to build Norway’s first energy-positive commercial building.
An important measure to further enhance the attractiveness
of the Brattørkaia area is the construction of a bridge over the
railway area, linking the quayside to the city centre. Work on
construction of the Tverrforbindelsen bridge started in 2011.
The development projects in Drammen are continuing through
Papirbredden Eiendom AS (60 per cent). Work on Phase II,
Building 1, of the Papirbredden project has been ongoing
throughout 2011, and the 9,000 square metre building was
virtually fully leased at year-end. The tenants include the
Norwegian Labour Inspection Authority, the pharmaceutical
company MSD AS, Buskerud University College and Telemark
University College. Papirbredden II is the first construction project in Norway designed from the outset to participate in the
FutureBuilt programme. FutureBuilt aims to promote climatefriendly architecture and urban development. Papirbredden
Eiendom AS also owns Kreftings gate 33, Drammen Science
Park, the old lighthouse Fyrhuset, and Union Scene in
Drammen. Drammen Science Park “Kunnskapsparken” is
primarily leased to higher education institutions and a library.
Union Scene is a modern cultural centre with stages, theatres
and offices for Drammen Town Council’s culture department.
Jointly controlled entities
Sørlandet Kunnskapspark Eiendom AS (51 per cent) owns the
science park Sørlandet Kunnskapspark. The property is home to
large tenants such as Agder Research, Høyskoleforlaget and the
Sørlandet Resource Centre, as well as a number of small companies that want to be part of a research-driven environment.
UP Entra AS (50 per cent) develops and manages approximately
80,000 square metres of property in the Hamar region. In 2011
the company completed a new building linked to Statens Hus
that has been leased to the South-Eastern Norway Regional
Health Authority (Helse Sør-Øst).
Oslo S Utvikling AS (33.33 per cent) is playing a major role in
the development of the Bjørvika harbour area in Oslo. In the
Opera Quarter, the company is building a total of approximately
200,000 square metres above ground level and a joint cellar area
comprising 75,000 square metres. In 2011 OSU completed and
handed over the Visma Building to the buyer.
The company develops properties for sale, meaning that the
properties are not recognised at fair value in the accounts, but at
historical cost. The company is accounted for in the consolidated
financial statements using the equity method and is recognised
at a value of NOK 372.5 million at 31 December.
The market value of the properties and projects in OSU is estimated to approximately NOK 6.4 billion (100 per cent). Entra’s
33.33 per cent ownership interest yields a market value of NOK
2.1 billion. This estimate has been calculated using the same
principles as for other valuations of Entra’s investment properties. Entra’s share of value-adjusted equity was NOK 1.8 billion
at 31 December 2011. Entra’s share of value-adjusted
equity, taking into account 10 per cent deferred tax was NOK
1.7 billion at 31 December 2011.
In 2012, OSU signed an agreement to sell all the buildings in
the DNB project. The transaction is based on a property value
of just under NOK 4.8 billion. Each of the buildings will be
transferred on completion, and the first building, Midtbygget,
is going to be handed over on 1 July 2012. The exact accrual
schedule for the recognition of revenue from the DNB transaction in OSU has not yet been finally decided.
Income statement and balance sheet, financial matters
and liquidity
General
The annual report has been filed on the assumption of the business being a going concern. The Board’s assessment is that this
is an accurate assumption. The company is in a healthy financial
position, and has good liquidity. There have been no events since
31 December 2011 that affect the financial statements.
Income statement and cash flow
The Group’s rental income in 2011 amounted to NOK 1,434.7
(1,421.6) million. The increase is mainly due to annual rent
increases, but also reflects the loss of rent from divested properties and ongoing renovations, and new rent from recently
acquired properties and completed projects. Other operating
revenues amounted to NOK 33.1 (80.2) million. The decline
was primarily due to the loss of income linked to Ribekk AS’s
housing project in Brekkeveien, and the cessation of income
from the sale of project management in Optimo Project AS,
32
which was sold in the second quarter of 2011. The Group’s
total operating revenues amounted to NOK 1,467.8 (1,501.8)
million.
Total operating expenses in 2011 came to NOK 463.7 (503.1)
million. The decline was mainly due to the fact that there were
no longer any expenses related to Optimo’s housing project
in Brekkeveien. Entra’s profit from property management
amounted to NOK 1,004.1 (998.7) million.
Geographical distribution by market value (NOK millions)
2 309
2 966
11 681
6 189
Central Oslo
Southern and Western Norway
Greater Oslo
Central and Northern Norway
Changes in the value of investment properties totalled NOK
632.6 (526.6) million in 2011. Attractive properties, primarily
in Oslo and Trondheim, rented to reliable tenants on long leases
and close to public transport have had a lower required rate of
return (yield) in 2011, contributing to the increase in value.
At 31 December 2011, the Group’s net yield based on contract
rents was 6.2 per cent (6.3 per cent). Changes in the risk assessment for certain major project properties, combined with renegotiation and signing of new contracts, have also had a positive
impact on the change in value. Market rents increased gradually
over the course of the year. This has a particularly big impact on
the values of properties with leases with a short remaining term.
The Group’s share of profit from associates and jointly controlled
entities amounted to NOK -28.4 (42.2) million. The decline
is primarily due to a negative change in the value of financial
instruments in Oslo S Utvikling AS (OSU). Last year, OSU
had a positive result, largely as a result of gains from the sale of
residential property.
The Group’s operating profit was NOK 1,604.8 (1,549.4)
million.
Net financial items totalled NOK -799.3 (-602.2) million. Net
realised financial items came to NOK -591.3 (-488.8) million
in 2011. The Group’s interest expense was NOK 614.8 (596.6)
million. The item other finance expense includes a write-down
Total assets (NOK millions)
of NOK -87.5 million, due to changes in the basis of calculation
for IFRIC 12 properties. Net unrealised changes in the value
of financial instruments amounted to NOK -208.0 (-113.4)
million. The change was due to falling market interest rates that
had a negative impact on the value of derivatives, plus the fact
that the market value of the Group’s interest-bearing loans has
almost reached nominal value.
The Group’s profit before tax in 2011 was NOK 805.6 (947.1)
million. The tax charge for the year totalled NOK 226.6 (248.5)
million. The Entra Eiendom Group’s profit after tax was NOK
579.0 (698.7) million before non-controlling interests, and
NOK 564.8 (NOK 737.2) million after non-controlling interests. Deferred tax is reported at the nominal tax rate.
Market value of the property portfolio (NOK millions)
Equity ratio
25 000
50,0 %
20 000
40,0 %
22 000
15 000
30,0 %
21 000
10 000
20,0 %
5 000
10,0 %
25 000
24 000
23 000
20 000
19 000
18 000
´07
´08
´09
´10
´11
0
´07
´08
´09
´10
33
´11
0,0 %
´07
´08
´09
´10
´11
The Group’s net cash flow from operating activities totalled
NOK 517.2 (517.0) million. This is at the same level as last year,
reflecting the stability of the profit from property management.
The difference between net cash flow from operating activities
and the operating profit is mainly explained by the change in the
value of investment properties and the interest and fees for loans
to financial institutions.
Net cash flow from investment activities came to NOK -1,052.5
(-762.6) million. The biggest investments in 2011 related to the
renovation projects at Fredrik Selmers vei 4 and Tvetenveien
22 in Oslo, Malmskriverveien 4 in Bærum, the new-build
projects Grønland 51 in Drammen, Brattørkaia 15A and B in
Trondheim, and the renovation and extension of the Norwegian
Petroleum Directorate’s premises at Professor Olav Hanssens vei
10 in Stavanger. Repayment of loans and dividends from associates and jointly controlled entities have increased net cash flow
from investment activities by NOK 217.7 million.
In 2011 net cash flow from financing activities totalled NOK
434.6 (166.8) million. For 2011 this mainly relates to net new
borrowing to finance ongoing projects. The total net change in
liquid assets for the year was NOK -100.8 (-78.7) million.
Balance
The Group’s book assets at the close of the year totalled NOK
23,740.3 (22,225.6) million. The carrying amount of the
Group’s investment properties and investment properties
held for sale rose by NOK 1,856.3 million in 2011 to NOK
21,880.4. Investment properties are valued at fair value, based
on the average of two external, independent valuations. Proper-
ties valued in accordance with the IFRIC 12 rules amounted to
NOK 1,318.7 million. The Group’s net interest-bearing debt
increased by NOK 799.2 million in 2011.
The Group’s equity at 31 December 2011 was NOK 7,391.4
(6,952.4) million. Deferred tax is calculated as the difference
between the tax value and the market value of the Group’s
investment properties, at a nominal rate of 28 per cent, and at
31 December 2011 was NOK 2,352.5 million.
The Group had an equity ratio of 31.1 (31.3) per cent at the
close of the year.
The Board considers the Group’s financial position to be
satisfactory.
Financial matters
The financial markets were volatile in 2011. The first half of the
year was marked by a general sense of optimism and the positive
developments in most markets. The second half of 2011 was
characterised by a clear slowdown in economic activities. This
trend is primarily due to increasing sovereign debt problems in
the eurozone, widespread uncertainty regarding the solvency
of the European banking sector, and the focus on the rising
national debt in the United States.
In the past six months, fears of a new global recession and concern over the sovereign debt crisis in the eurozone have impacted
the financial markets, resulting in falling equity markets, sharp
falls in market interest rates, and limited availability and high
cost of credit.
34
The Group has chosen a cautious finance strategy with an
adequate equity ratio that will allow financial flexibility over the
economic cycle. Entra has defined a target range for its equity
ratio of 25-35 per cent over the economic cycle. This means
that the company will normally aim for the median value of the
target range, i.e. an equity ratio of 30 per cent.
HSE and organisation
Entra is responsible for ensuring the safety of its customers, suppliers, employees and guests. Entra’s goal of being a zero-harm
workplace underpins all the Group’s health, safety and environmental work. The main HSE requirements are specified in the
Group’s HSE policy.
Entra is exposed to the performance of the financial markets and
in 2011 experienced gradually rising rates in the credit markets
for new credit. The market for commercial paper remained very
liquid throughout the year. During the year, Entra established
new credit facilities with its banks to secure its financing needs
in 2012.
Risk analysis is a key element in Entra’s HSE work and is central
to all Entra’s projects and the day-to-day operation of the properties. Risk analysis shall also contribute to continuous improvements by ensuring priority is given to the most important HSE
measures and that effective action plans are established. Good
reporting routines, combined with recording and follow-up of
all types of injuries and adverse events, are an important part of
the Group’s improvement work.
At 31 December 2011, 67 per cent of the Group’s total interestbearing debt was subject to fixed interest rates. At the same date,
the effective term to maturity of the Group’s interest rate hedging instruments was 3.4 years.
The Group is financed through a variety of bank and capital
market instruments. The loans have a spread-out maturity structure. At 31 December 2011, the Group’s liquid assets amounted
to NOK 48.3 (149.1) million. In addition the company had
committed, undrawn credit facilities with Norwegian banks
totalling NOK 4.5 (4.4) billion. The Group’s liabilities at 31
December 2011 totalled NOK 16,348.9 (15,273.2) million.
The Group’s nominal interest-bearing debt totalled NOK
12,694 (12,135) million at year-end, equivalent to 53.5 (54.6
per cent) of the total equity.
Entra’s LTI rate (the number of work-related injuries resulting
in absence per million work-hours) was 6.3 in 2011, compared
with 7.4 in 2010. Two of the accidents were of a serious nature,
although there was limited damage. The events have been
followed up as prescribed by the company’s procedures, and
corrective measures have been implemented for similar work
processes. There were no fatal accidents associated with the
Group’s activities in 2011.
At the close of 2011, the Group had 155 employees in total, corresponding to 152 full-time equivalents. Staff turnover at Entra
Eiendom AS was 9.5 per cent in 2011, which was 1.7 percentage
point higher than in 2010. Adjusted for natural wastage (retirement), turnover was 8.5 per cent, which is 3.2 percentage points
higher than in 2010.
35
Sickness absence at Entra Eiendom AS was 4.5 per cent, up by
1.1 percentage points compared with 2010. The company works
systematically to prevent sickness absence, and monitors the
progress of staff on sick leave closely.
In 2011, Entra Eiendom AS reviewed its organisational structure
with a view to ensuring the Group has the best organisation
to meet its business goals. A new organisational structure was
established, with different division into regions and clarification
of the mandates for roles within the Group’s various business
areas and positions.
In 2011 Entra Eiendom AS participated in the employee
satisfaction survey “Great Place to Work” for the third time.
This important survey provides a basis for comparing employee
satisfaction both within the organisation and in relation to
other companies. This year’s survey revealed a slight decline in
employee satisfaction. Employee satisfaction has remained stable
in the period 2009-2011. The company is working on concrete
plans to increase employee satisfaction in 2012.
In addition, a new HR strategy has been adopted in 2011 with
new management principles. The new management principles
are firmly rooted in Entra’s core values and are useful both to set
the standard for management and to indicate to the employees
what to expect. The management principles will also define the
course for the further development of management at Entra.
Cooperation with employee organisations was good and constructive during 2011, and made a positive contribution to the
running of the company.
Equality and diversity
At 31 December 2011, 28 (28.6) per cent of the Group’s
employees were women. Around 56 per cent of the positions at
the company are in the operations and maintenance department,
and most of these jobs are related to the actual operation of the
company’s properties, which is an area where there tend to be
very few female applicants. At the close of 2011, 8 per cent of
the workers in the operations and maintenance department were
women, and there are ongoing efforts to increase the proportion
of women in this area of the business. Elsewhere in the company,
51 per cent of the employees are women. Entra aims to increase
the number of women working at the company, and this goal
has been incorporated into the company’s recruitment
procedures. In 2001, over 40 per cent of the Board members
were women. (1)
Employee benefits, such as flexible working hours and full pay
during sickness and parental leave, regardless of the National
Insurance Scheme’s limits, are regarded as important tools in
ensuring equal opportunities.
Reducing sickness absence, as stipulated in the agreement on
inclusive working life, is a priority at Entra. The company
has established a seniors policy. The company believes in the
benefits of diversity, and this goal has been incorporated into the
company’s recruitment procedures. The company’s recruitment
processes encourage all qualified candidates to apply, regardless
of their age, gender, ethnic background or any disabilities.
4.8 per cent of the workforce at Entra works part-time, and 25
per cent of the part-time staff are women. They have all chosen
to work part time.
The company’s impact on the environment
Entra’s environmental strategy shall serve to reduce the company’s negative impact on the environment. The Group has
achieved significant energy savings through target-oriented work
over several years to reduce energy consumption. The Group had
an average energy consumption adjusted for temperature variations of 202 kWh per square metre in 2011, and new goals have
been set for further reductions in 2012. Energy consumption
is reduced by means of good control systems, continuous training of operating personnel, and investments in energy-saving
measures at the properties. Using online tools, the operative staff
continuously monitor energy consumption, water consumption,
waste volumes and source sorting at all properties. The findings
are presented at customer meetings with a view to motivating
tenants to work for a better environment. The Group’s total carbon emissions in 2011 amounted to 51,201,000 (57,775,000)
kg, of which carbon emissions from oil and gas heating account
for only 39,000 (47,000) kg.
Entra was the first property company in Norway to introduce
energy labelling of all its properties. The very process of working
on energy labelling also revealed new opportunities to further
reduce energy consumption.
Entra is also actively involved in environmental issues outside
its own business areas. Key members of staff have roles on the
At the end of the year, one female board member left the Board. She has not
yet been replaced, meaning the percentage of women on the Board was under 40
per cent at the time of signing.
(1)
36
boards of the Norwegian Green Building Council and the Green
Building Alliance.
Enova projects
In total, 713,400 square metres of the Group’s property portfolio
is covered by energy-saving projects started in 2006 and 2007
with the support of Enova. The aim of the Enova projects is to
reduce energy consumption in the buildings by approximately
19 GWh per year relative to their energy consumption at the
time the projects were started. By 2011, energy consumption
had been cut by 24.9 GWh per year, equivalent to a reduction of
15.5 per cent. The specific energy consumption of the properties covered by Enova projects was 195 kWh per square metre in
2011. This is significantly lower than at other comparable buildings, and reflects the hard work of the company’s operations
department and close co-operation with the customers.
Of the four Enova projects started in 2006 and 2007, the project
in Eastern Norway was completed in spring 2011. The project
achieved energy savings of 12.8 GWh per year and has also
converted 12.8 GWh per year into renewable heat. Entra has
chosen energy-optimal solutions that meet the passive house or
low energy standards in all its new-build and upgrade projects,
qualifying the projects for grants from Enova.
The Enova projects have been incorporated into Entra’s environmental project, to allow more systematic analysis of the
energy consumption at each property and, not least, to see how
the operation of the building’s technical installations can be
optimised.
37
Features of historic value
All features of historic value in the company’s buildings are
carefully safeguarded in line with current laws and regulations.
When disposing of properties comprising buildings constructed
before 1950, the company follows the provisions contained in
the fourth paragraph of section 2.1 of the “Order on the disposal
of real estate belonging to the state, etc.” (Royal Decree of 19
December 1997), which was also referred to in Report no. 29
(2008-2009) to the Norwegian parliament (the Storting).
Corporate governance at Entra is based on the principles set out
by the Norwegian Corporate Governance Committee (NUES)
in its Norwegian Code of Practice for Corporate Governance.
In 2011 there were seven Board meetings. At the 2011 AGM,
the Board was expanded to include two more shareholder-elected members: Ketil Fjerdingen and Ida Helliesen. Åse Koll Lunde
left the Board at the end of 2011, as a result of a change in
employment. At the time of writing, the AGM had not elected a
replacement Board member.
The Group has established a set of values and ethical guidelines
that underpin its operations. Defined overall objectives and
strategies highlight Entra’s ambitions, strategic choices and longterm goals. Guidelines, routines and authorisation structures
have been drawn up to reinforce and operationalise the strategy
and overall objectives.
See the chapter of this report on corporate governance for a
more detailed discussion of the corporate governance prin-
ciples and reporting pursuant to Section 3-3 of the Norwegian
Accounting Act.
Shareholder information
The Norwegian Government, through the Ministry of Trade and
Industry, owns 100 per cent of the shares in Entra Eiendom AS.
The owner cannot dispose of the shares in the company without
special authorisation from the Storting.
In the Government’s Ownership Report, Report no. 13 (20102011) to the Storting, the Government indicates that it may
permit the company to finance its equity capital needs in the
private market. This may entail a government sell-off as part of a
structural transaction and/or initial public offering. The Government therefore requested authorisation from the Storting to list
and/or sell up to two-thirds of the shares in Entra Eiendom AS.
On 9 June the Storting adopted a resolution to authorise the
Government to reduce the government ownership interest in
Entra Eiendom AS down to 33.4 per cent in connection with a
sell-off and/or initial public listing of the company. Before any
sell-off and/or initial public offering takes place, the Government will review whether individual buildings in Entra’s portfolio should be taken over by Statsbygg on commercial terms.
Dividend policy
The shareholder has adopted a dividend policy for Entra
Eiendom AS. The annual dividend shall constitute 50 per cent
of the Group’s profit after tax and non-controlling interests as
calculated under the Norwegian Accounting Act and generally
accepted accounting principles, or be equivalent to at least two
38
per cent of book equity after non-controlling interests under
IFRS at the start of the financial year. The expected dividend
from Entra Eiendom AS is presented each year in the national
budget.
The national budget for 2012 anticipates a dividend of NOK
137 million from Entra Eiendom AS for the 2011 financial year.
Profit for the year and allocations
In 2011 Entra Eiendom AS made a profit after tax of NOK
143.9 (72.1) million, as set out in the financial statements
prepared in accordance with the Norwegian Accounting Act and
Norwegian generally accepted accounting principles.
The Board proposes that Entra Eiendom AS’s profit for the year
be appropriated as follows:
Transferred to other equity
NOK 6.9 million
Proposed dividends
NOK 137.0 million
The company’s distributable reserves totalled NOK 507.6
million at 31 December 2011.
Risks associated with Entra’s business
The Group is exposed to financial risk through the liabilities
on its balance sheet. The management of its financing activities is regulated by the limits set in the Group’s finance policy.
Changes in interest rates will have an impact on the Group’s
cash flows. The company manages this risk by actively using
various interest-rate hedging instruments. Refinancing risk is
reduced by entering into long-term loan agreements and by having a spread-out maturity structure. Entra does not expose itself
to currency risk. The high proportion of public-sector tenants
means that credit and counterparty risk is limited. The creditworthiness of other customers is continuously checked. Any lack
of financial strength is compensated for by satisfactory security
being demanded.
The Group is exposed to project risk in conjunction with the
construction and renovation of properties. The company takes
this type of risk into account in its investment analysis prior to
deciding to start work on a project, and project risk is subsequently continuously monitored throughout the project period.
When calculating profitability, a risk premium is added to allow
for things like cost increases over the construction period, delays
and contractual disputes. When making investment decisions,
market risk is also taken into account when analysing cash flow
and the required rate of return.
The Group is exposed to changes in market rents in the form
of economic downturns. This risk is reduced by ensuring the
Group has an even expiry structure and a maximum of 11.1
per cent of Entra’s contract portfolio, in value terms, expires in
any given year. There is also risk associated with negotiation and
renegotiation of lease contracts. This risk is monitored in an
ongoing process by keeping track of when contracts expire and
planning market activities. 80 per cent of the Group’s customers are in the public sector, and changes in the prerequisites
and efficiency improvements in the public sector may affect the
company’s risk exposure. The market value of the company’s
property portfolio is affected by cyclical fluctuations in the
economy. A decrease in the market value will reduce the Group’s
equity ratio.
The graph below shows the maturity structure of the Group’s
contract portfolio.
Expiry structure of the contract portfolio
180
180
160
160
140
140
120
120
100
100
80
80
60
60
40
40
20
20
-
´12
´13
´14
´15
´16
´17
´18
´19
´20
´21
´22
´23
´24
´25
´26
´27
´28
´29
39
´30
´31>
Annual rent (NOK millions)
No. of contracts
Outlook and future development
General
Entra is constantly developing new projects and new business
areas, in support of the company’s business concept of adding
value by developing, leasing and operating attractive and highly
eco-friendly premises. The Group’s growth ambitions are largely
associated with Greater Oslo, Drammen, Bergen and Trondheim
in order to meet the needs of existing and new customers.
After about two years of intense work, at the start of 2012 Entra
published development plans for the Greenfield Datacenter
project and its vision for the redevelopment of the Tullinkvartalet quarter in Oslo.
It is essential for Entra to have the trust of its customers, owners,
employees and of society as a whole. Entra will continue to build
on the company’s strong position in the rental market for commercial property. In order to achieve this, it will be important to
focus on the company’s corporate social responsibility, including
the company’s environmental goals, and on integrating that
responsibility into day-to-day operations and development
projects.
Market development
Although the economic situation is still unsettled, the negative trends we saw in the second half of 2011 appear to have
stabilised. The Norwegian economy is in a solid position, and
the mainland economy is expected to achieve a slightly positive
result in 2012.
The rental market has performed well in several places in Norway, with prices rising for centrally located premises of a high
standard. By contrast, the transaction market has been dominated by the turmoil in the financial markets during the year.
Demand for office space appears to be somewhat lower ahead
than previously projected. Economic growth and the rise in
employment are expected to be moderate. The office vacancy
rate is expected to rise slightly in 2012, as a result of the completion of a number of office buildings. Rents for modern, centrally
located premises are expected to increase somewhat in 2012.
Rents for less central and less efficient premises are expected to
remain unchanged or decrease slightly. Going forward, Entra
will continue to gain a competitive advantage from having
centrally located properties close to public transport hubs, with
modern, environmentally sustainable, flexible solutions in addition to efficient operation of the properties.
In the investor market, there was high demand for properties
in good locations and with a reliable cash flow in 2011. This is
expected to continue into 2012. A transaction volume of around
NOK 40 billion is expected in 2012. Yields are expected to
remain unchanged or increase slightly in 2012, with continued
high yield spread between good and bad properties.
40
Financial development
Entra’s equity ratio has remained stable, and the Group has
long-term loan agreements. Transactions during 2011 showed
that there is a willingness to lend money to Entra, even at times
when the financing markets are volatile and challenging.
It is the view of the Board that Entra’s strong cash flow and
balance sheet provide a solid financial platform. The Board will
continue its conservative financial risk profile. Entra will use its
strong position to continue growing profitably in accordance
with the Group’s strategy. Entra is involved in several major
development projects.
The Board is of the opinion that the Group has good foundations for further growth and development.
Directors’ report (forts.)
Oslo, 28 March 2012
The Board of Directors of Entra Eiendom AS
Chair of the Board
Martin Mæland
Vice-chair
Ketil Fjerdingen
Board member
Finn Berg Jacobsen
Board member
Board member
Ida Helliesen
Board member
Mari Fjærbu Åmdal
Board member
Frode Halvorsen
Board member
Tore Benediktsen
Board member
Kyrre Olaf Johansen
Chief Executive Officer
41
Declaration by the
Board of Directors and CEO
Declaration by the Board of Directors and CEO
We declare that, to the best of our knowledge, the consolidated
financial statements for the year 2011 have been prepared in
accordance with IFRS, as stipulated by the EU, including the
additional information required by the Norwegian Accounting
Act, and that the parent company’s financial statements for 2011
have been prepared in accordance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles,
and that the information contained therein provides a true and
fair picture of the assets, liabilities, financial position and results
of the company and the Group. We also declare that, to the best
of our knowledge, the annual report gives a true and fair picture
of the performance, results and financial position of the company and the Group, as well as describing the most important
areas of risk and uncertainty faced by the business.
Oslo, 28 March 2012
Chair of the Board
Martin Mæland
Vice-chair
Ketil Fjerdingen
Board member
Finn Berg Jacobsen
Board member
Board member
Ida Helliesen
Board member
Mari Fjærbu Åmdal
Board member
Frode Halvorsen
Board member
Tore Benediktsen
Board member
Kyrre Olaf Johansen
42
Entra Annual report 2011 Declaration by the Board of Directors and CEO
43
“Increasingly people are discovering the link between
profitability and sustainable development.”
Consolidated financial statements
45
Statement of comprehensive income
1 Jan.-31 Dec.
Note
2011
2010
Rental income
22
1 434.7
1 421.6
Other operating revenue
23
Total operating revenue
All amounts in NOK millions
Maintenance
33.1
80.2
1 467.8
1 501.8
61.9
69.8
Operating expenses
25
88.6
112.2
Other property costs
7. 10. 26
127.2
133.9
24. 27
186.0
187.2
463.7
503.1
1 004.1
998.7
8
632.6
526.6
12
-28.4
42.2
-3.5
-18.1
1 604.8
1 549.4
Administrative owner costs
Total operating expenses
Net income from property management
Unrealised changes in value of investment properties
Share of profit from associates and jointly controlled entities
Profit/loss on the sale of non-current assets
Operating profit
Interest and other finance income
3-3
114.7
109.0
Interest and other finance expense
3-3
-706.0
-597.9
-591.3
-488.8
Net realised financial items
Unrealised changes in value of financial instruments
3
Net financial items
Profit before tax
-208.0
-113.4
-799.3
-602.2
805.6
947.1
-226.6
-248.5
Profit/loss for the year
579.0
698.7
Total comprehensive income for the year
579.0
698.7
564.8
737.2
14.2
-38.6
564.8
737.2
14.2
-38.6
3 972.0
5 184.7
Tax expense
28
Profit for the year attributable to
Shareholders in the parent company
Non-controlling interests
Total comprehensive income for the year attributable to
Shareholders in the parent company
Earnings per share (NOK)
Continuing operations
Ordinary = Diluted
31
Notes 1 through to 32 form an integral part of the consolidated financial statements.
46
Entra Annual report 2011 Consolidated accounts
Balance sheet at 31 Dec.
- Assets
Note
31 Dec. 2011
31 Dec. 2010
1 Jan. 2010
15.7
NON-CURRENT ASSETS
Goodwill
7
-
-
Other intangible assets
7
16.5
12.6
7.0
16.5
12.6
22.7
18 346.7
Total intangible assets
Investment properties
4, 8
21 843.9
19 955.6
Property used by owner
10
6.0
6.2
6.5
Other property, plant and equipment
10
25.4
40.2
21.7
21 875.3
20 002.0
18 374.8
304.9
Total property, plant and equipment
Investments in associates and jointly controlled entities
12
502.0
623.1
Loans to associates and jointly controlled entities
29
14.2
135.6
385.5
Other non-current receivables
13
1 107.5
1 168.5
1 130.1
1 623.6
1 927.3
1 820.5
23 515.4
21 941.9
20 218.0
Total non-current financial assets
Total non-current assets
CURRENT ASSETS
Stock
9
-
-
104.3
Trade receivables
14
34.5
24.6
21.0
Other receivables
14
105.6
41.5
93.1
140.1
66.1
218.4
48.3
149.1
227.8
188.4
215.2
446.2
36.5
68.5
404.7
23 740.3
22 225.6
21 068.9
Total current receivables
Cash and bank deposits
15
Total current assets
Investment properties held for sale
8
TOTAL ASSETS
47
-Equity and liabilities
Note
31 Dec. 2011
31 Dec. 2010
1 Jan. 2010
Paid-in equity
16
1 414.2
1 414.2
1 414.2
Retained earnings
16
5 858.0
5 418.1
4 782.8
119.2
120.1
259.0
7 391.4
6 952.4
6 456.1
9 345.5
EQUITY
Total equity
LIABILITIES
Oslo, 28 March 2012
Interest-bearing liabilities
19
9 086.3
8 491.3
Pension liabilities
17
84.9
77.9
77.0
Deferred tax
28
2 352.5
2 124.3
1 877.8
3-2
769.5
697.5
629.1
18
63.8
74.5
35.0
12 356.9
11 465.5
11 964.4
Financial derivatives
Other liabilities
Total non-current liabilities
Chair of the Board
Martin Mæland
Vice-chair
Trade payables and other payables
20
250.6
175.1
270.2
19
3 616.5
3 513.2
2 306.5
Prepayments and provisions
21
124.9
119.5
71.7
3 992.0
3 807.7
2 648.4
Total liabilities
16 348.9
15 273.2
14 612.8
TOTAL EQUITY AND LIABILITIES
23 740.3
22 225.6
21 068.9
Total current liabilities
Ketil Fjerdingen
Board member
Finn Berg Jacobsen
Board member
Board member
Ida Helliesen
Board member
Mari Fjærbu Åmdal
Board member
Frode Halvorsen
Board member
Tore Benediktsen
Board member
Kyrre Olaf Johansen
48
Consolidated statement
of changes in equity
Equity at 1 Jan. 2010
Paid-in
Retained
Total
Non-controlling
Total
equity
earnings
majority
interests
equity
1 414.2
4 782.8
6 197.0
259.0
6 456.1
737.2
737.2
-38.6
-114.5
-114.5
Comprehensive income
Dividend paid
Buy-out of non-controlling interests
Equity at 31 Dec. 2010
1 414.2
Comprehensive income
Dividend paid
Change in non-controlling interests
1 414.2
49
698.7
-114.5
12.6
12.6
-100.4
-87.9
5 418.1
6 832.3
120.1
6 952.4
14.2
564.8
564.8
-124.6
-124.6
579.0
-0.4
-0.4
-15.0
-15.4
5 858.0
7 272.2
119.2
7 391.4
-124.6
Consolidated
cash flow statement
Cash flow from operating activities
Note
2011
2010
32
1 153.1
1 145.9
Interest paid on loans from financial institutions
-618.6
-628.9
Payment of loan fees
-17.3
-
Net cash flow from operating activities
517.2
517.0
47.6
260.6
Proceeds from sales of property, plant and equipment
Sales of operations, net liquidity
11
-40.8
56.0
Purchase of investment properties
8
-127.4
-244.5
Cost of upgrades to investment properties
8
-1 135.1
-735.5
-
-51.4
-12.0
-10.8
Net cost of purchase of limited companies
Purchase of intangible assets and other property, plant and equipment
7. 10
Purchase of shares and other investments
-2.6
-1.3
In-/outflow on loans to associates and jointly controlled entities
29
122.4
-35.6
Dividends from associates and jointly controlled entities
12
95.3
-
-1 052.5
-762.6
2 568.7
Net cash flow from investment activities
New non-current liabilities
19
2 597.0
New current liabilities
19
4 144.0
3 515.0
Repayment of non-current liabilities
19
-2 188.0
-2 663.5
Repayment of current liabilities
19
-3 994.0
-3 050.0
Equity injection by non-controlling interests
Purchase of non-controlling interests
Dividends paid
16
Net cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
50
15
0.2
-
-
-87.9
-124.6
-115.4
434.6
166.8
-
-
-100.8
-78.7
149.1
227.8
48.3
149.1
NOTE 1 General information
Entra Eiendom was established on1 July 2000. Entra Eiendom is
engaged in the development, letting, management, operation, sale and
purchase of real estate in Norway. The company is one of Norway’s
largest property companies, with a total property portfolio of 1,214,181
square metres and 975,951 square metres under management, of which
9,314 square metres is vacant at 31 December 2011. Entra Eiendom’s
head office is situated in Oslo. The company is organised into four
regions: Central Oslo, Greater Oslo, Southern and Western Norway, and
Central and Northern Norway. The regional offices are located in Bergen
and Trondheim.
All of the shares in the company are owned by the Norwegian Government through the Ministry of Trade and Industry. The Board consists
of six shareholder-elected members and three employee representatives.
Entra Eiendom AS operates in direct competition with private players on
a commercial basis. The company is fully financed in the private markets.
The company mainly has public-sector tenants, and at 31 December
2011 the proportion of public-sector tenants was 80 (79) per cent.
The consolidated financial statements were adopted by the Board of
Directors on 28 March 2012.
NOTE 2 Accounting principles
ACCOUNTING POLICIES
The most important accounting policies used to prepare the annual
financial statements are described below. These policies are used in the
same way for all periods presented, unless otherwise indicated in the
description.
BASIC PRINCIPLES
The consolidated financial statements have been prepared in accordance
with International Reporting Standards (IFRS) and interpretations by
the IFRS Interpretation Committee (IFRIC), as endorsed by the EU,
as well as additional Norwegian reporting requirements pursuant to the
Norwegian Accounting Act.
The consolidated financial statements have been prepared on a h
istorical
cost basis, with the following modifications: investment properties as
well as financial assets and financial liabilities have been measured at fair
value. Financial instruments measured at fair value include the Group’s
non-current borrowings, derivatives and investment shares.
Presenting the accounts under IFRS requires the management to make
certain assessments and assumptions. The application of the company’s
accounting policies also requires management to exercise judgement.
Estimates and subjective judgements are based on past experience and
other factors that are considered relevant. Actual results may deviate from
these estimates.
The estimates and underlying assumptions are continuously reassessed.
Changes in accounting estimates are recognised in the period in which
the changes occur if they only apply to that period. If the changes also
apply to future periods, the impact is distributed over the current and
future periods. Note 4 details items in the accounts that are based on a
significant amount of subjective judgement.
The consolidated financial statements have been filed on the assumption
of the business being a going concern.
The Group has started using the following new and amended
standards in 2011
No new IFRS or IFRS standards and interpretations came into effect for
2011 year ends that are considered to have or expected to have a significant impact on the consolidated financial statements.
Standards, amendments to existing standards and interpretations that
have not yet come into force, and which the Group has not chosen to
apply early
The following standards, amendments to existing standards and interpretations of existing standards have been published and will be mandatory
for the consolidated financial statements for periods starting on or after
1 January 2013, and which the Group has chosen not to adopt early with
effect for the 2011 financial statements.
IAS 19 Employee benefits
This standard was amended in June 2011. The amendments entail that
all actuarial gains and losses are recognised in comprehensive income as
51
they arise (eliminating the “corridor”), immediate recognition of all costs
relating to pension liabilities accrued in previous periods, and replacement of interest expenses and anticipated return on pension assets with a
net interest amount, calculated by applying the discount rate to the net
pension liability or asset. Unrecognised actuarial gains/losses at
31 December 2011 are presented in Note 17 – Pensions. The Group
has not yet completed its analysis of the impact of the amendments to
IAS 19. The Group will implement the revised standard as of the 2013
financial year.
IFRS 9 Financial instruments
Revised versions of IFRS 9 were published in November 2009 and
October 2010, replacing the rules in IAS 39 on recognition, classification
and measurement of financial instruments. Under IFRS 9, financial assets
are divided into two categories depending on how they are measured:
those measured at fair value and those measured at amortised cost.
Classification is made on initial recognition. Classification will depend
on the business model the company uses to handle its financial instruments and the contractual cash flow characteristics of the instrument.
The rules for financial liabilities are largely the same as under IAS 39.
The most significant change in cases where financial liabilities are measured at fair value is that that part of gains or losses in the fair value of
these instruments attributable to changes in the company’s own credit
risk are to be presented in other comprehensive income and costs, as
opposed to in the income statement, as long as this does not result in
accrual errors in the measurement of profit or loss. The Group intends to
adopt IFRS 9 once the standard comes into force and has been approved
by the EU. The revised standard comes into force for accounting periods
starting on or after 1 January 2013, but the IASB has published for
public comment a proposal to defer the mandatory effective date of IFRS
9 to periods beginning on or after 1 January 2015. The Group has not
yet assessed the full impact of IFRS 9. However, a preliminary assessment indicates that the standard will not have a significant impact on the
Group’s accounts, apart from effects due to changes in fair value attributable to changes in the company’s own credit risk, as mentioned above.
IFRS 10 Consolidated accounts
The standard is based on the existing principles defining control as the
decisive factor in determining whether a company is to be included in
the consolidated accounts of the parent company. The standard provides
extensive guidance on determining whether control exists in difficult
NOTE 2 Accounting principles (cont.)
cases. The Group has not yet assessed all the possible consequences of
IFRS 10. The Group intends to apply the standard in accounting periods
beginning on or after 1 January 2013.
IFRS 11 Joint arrangements
The standard replaces IAS 31 “Interests in joint ventures” and SIC-13
“Jointly-controlled entities – Non-monetary contributions by venturers”.
IFRS 11 has two main categories of joint arrangements: joint operations and joint ventures. The proportionate consolidation method is no
longer permissible. The equity method of accounting must be used for
interests in jointly controlled entities. For arrangements classified as joint
operations, the parties recognise their share of the assets and liabilities in
the collaboration. The classification of joint arrangements is determined
by the nature and terms of the arrangement, as opposed to its formal
structure. The standard is not expected to entail any significant changes
for the Group.
IFRS 12 Disclosure of interests in other entities
The standard contains the disclosure requirements for financial interests
in subsidiaries, jointly controlled entities, associates, special purpose
entities and other unconsolidated structured entities. The Group has not
yet assessed the full impact of IFRS 12. The Group intends to apply the
standard in accounting periods beginning on or after 1 January 2013.
IFRS 13 Fair value measurement
The standard provides a precise definition of fair value for use in IFRS,
provides a single framework describing how to measure fair value in
IFRS, and defines what additional information must be disclosed when
fair value is used. The standard does not expand the area of application
for the use of fair value; rather it provides guidance on how it should be
applied when fair value measurement is already required or permitted
by other IFRSs. The Group measures certain assets and liabilities at fair
value. The Group has not yet assessed the full impact of IFRS 13. The
Group is planning to apply IFRS 13 in accounting periods beginning on
or after 1 January 2012.
There are no other IFRS standards and interpretations that have not yet
come into effect that are expected to have a significant impact on the
consolidated financial statements.
CONSOLIDATION PRINCIPLES
Subsidiaries
Subsidiaries are entities over which the Group exercises control of financial and operating policies, normally through ownership of more than
half the voting power. When deciding whether control exists, the effect of
potential voting rights that can be exercised or converted on the balance
sheet date is taken into consideration.
The Group also assesses whether there is control in entities over which it
does not have more than 50 per cent of the voting rights, but in which
it is nevertheless able to influence financial and operational guidelines in
practice (“actual control”). Actual control can exist in situations where
the other voting rights are spread over a large number of shareholders
who are not realistically capable of organising their voting. In the assessment of whether the Group has actual control over a subsidiary, decisive
importance is attached to whether the Group can choose the Board it
wants.
Subsidiaries are consolidated from the date on which control is transferred to the Group, and are deconsolidated when control ceases.
The acquisition method is used to account for purchases of subsidiaries
that constitute a business. The transferred consideration (cost of acquisition) is measured at fair value of the transferred assets, the equity instruments that have been issued, obligations incurred in transferring control
and direct costs relating to the actual purchase. The cost of acquisition
also includes the fair value of all assets or liabilities that are the result of
an agreement on contingent consideration.
Identifiable purchased assets, assumed liabilities and contingent liabilities
are recognised at fair value on the date of acquisition. The costs associated
with the business combination are expensed when they are incurred.
If the aggregate of the consideration, the carrying amount of noncontrolling interests and the fair value on the acquisition date of any
previously held ownership interests exceeds the fair value of the acquired
entity’s identifiable net assets, the difference is capitalised as goodwill.
If the aggregate is less than the company’s net assets, the difference is
immediately recognised in profit.
Contingent consideration is recognised at fair value on the date of
acquisition. Subsequent changes in fair value of the contingent consid-
52
eration are recognised in profit or loss or recognised as a change in other
comprehensive income, if the contingent consideration is classified as
an asset or a liability. Contingent consideration classified as equity is not
remeasured, and subsequent settlement is recognised in equity.
For accounting purposes, acquisitions of subsidiaries that do not constitute a business as defined in IFRS 3, such as subsidiaries that only consist
of a building, are treated as asset acquisitions. The cost of acquisition is
then attributed to the individual identifiable assets and liabilities based
on their relative fair values on the acquisition date. Expenses associated
with the transaction are capitalised under the property. In such cases no
provision is made for deferred tax (cf. exceptions in IAS 12).
Intragroup transactions, balances and unrealised gains are eliminated.
Unrealised losses are eliminated, but are considered evidence of impairment in terms of writing down the value of the transferred asset. If
necessary, the accounting principles at subsidiaries are changed in order
to bring them into line with the Group’s accounting principles.
Transactions with non-controlling interests
Transactions with non-controlling interests in subsidiaries are treated
as equity transactions. If shares are acquired from a non-controlling
interest, the difference between the remuneration and the proportion
of the carrying amount of the subsidiary’s net assets attributable to the
shares is recognised in the equity of the parent company’s owners. Gains
and losses arising from the sale of shares to non-controlling interests are
similarly recognised in equity.
If the Group loses control, any residual holding is remeasured at fair
value through profit or loss. Thereafter, the fair value is used as the
acquisition cost for accounting purposes, and the holding is treated as an
investment in an associate, in a jointly controlled entity or in a financial
asset. Amounts previously included in comprehensive income that relate
to the company are treated as if the Group had disposed of the underlying asset and liability. This may result in amounts that were previously
included in comprehensive income being reclassified to the income
statement.
Jointly controlled entities are companies where the Group shares
control with other parties, and where an agreement between the parties
ensures that strategic decisions on financial and operating policies are
nanimous. This applies to companies where a shareholder agreement
u
ensures joint control of the business. The Group’s interests in jointly controlled entities are measured using the equity method. If necessary, the
accounting principles at jointly controlled entities are changed in order
to bring them into line with the Group’s accounting principles.
The proportion of any gains and losses on the sale of assets to jointly controlled entities that is attributable to other owners (outside the Group) of
the jointly controlled entity is recognised in profit or loss. When assets
are acquired from a jointly controlled entity, any gain or loss is only
recognised in profit or loss when the asset is sold by the Group. A loss is
recognised immediately if the transaction indicates that the value of the
company’s current or non-current assets has fallen.
If the Group no longer has significant influence, any residual holding is
remeasured at fair value through profit or loss. Thereafter, the fair value
is used as the acquisition cost for accounting purposes, and the holding
is treated as a financial asset. Amounts relating to the company that
were previously recognised in comprehensive income are treated as if
the associate had disposed of the underlying assets and liabilities. This
may result in amounts that were previously included in comprehensive
income being reclassified to the income statement. If the Group reduces
its shareholding but retains significant influence, a proportionate share of
the amounts previously recognised in comprehensive income is reclassified to the income statement.
FOREIGN CURRENCY
The Group’s presentation currency is NOK. This is also the functional
currency of the parent company and all of its subsidiaries.
Associates
Associates are companies over which the Group has significant influence
but not control. Significant influence normally exists where the Group’s
investment represents between 20 and 50 per cent of the voting power.
Investments in associates are initially recognised on the acquisition date
at the acquisition cost, and thereafter using the equity method. Investments in associates include any excess values and goodwill identified at
the time of acquisition, less any subsequent impairment losses.
Foreign currency transactions are translated at the exchange rate on the
date of the transaction. Monetary foreign currency items are translated
to NOK at the exchange rate on the balance sheet date. Non-monetary
items that are measured at cost in a foreign currency are translated to
NOK using the exchange rate on the transaction date. Non-monetary
items that are measured at fair value in a foreign currency are translated
to NOK using the exchange rate on the balance sheet date. Exchange rate
fluctuations are recognised in profit or loss as they arise.
The Group’s share of the profit and loss of associates is recognised and
added to the carrying amount of the investments together with the portion of unrecognised equity changes. The Group’s share of the comprehensive income of associates is recognised in the Group’s comprehensive
income and added to the carrying amount of the investments. The
Group does not recognise its share of the loss if this would result in
a negative carrying amount for the investment (including the entity’s
uncollectible receivables), unless the Group has taken over obligations or
made payments on behalf of the associate.
SEGMENT INFORMATION
Operating segments are reported in the same way as in internal reports to
the company’s highest decision-making authority. The company’s highest
decision-making authority, which is responsible for allocating resources
and assessing the profitability of the operating segments, has been identified as the group management.
The Group’s share of unrealised gains on transactions between the Group
and its associates are eliminated. This also applies to unrealised losses,
unless there is a permanent fall in value. Where necessary, the accounts of
associates have been brought into line with the Group’s accounting principles. Gains and losses arising from the dilution of ownership interests
in associates are recognised in profit or loss.
INVESTMENT PROPERTY
Investment property is owned with the aim of achieving a long-term
return from rental income. Properties used by the Group are valued
separately under property, plant and equipment. Investment property is
recognised at fair value, based on market values identified by independent valuers. Gains or losses as a result of changes in the market value of
investment properties are recognised in profit or loss as they arise, and are
presented on a separate line after income from property management.
53
Initial measurement also takes into consideration the property’s acquisition cost, which includes direct transaction costs such as document duty
and other public duties, legal fees and due diligence costs. Transaction
costs associated with properties acquired through business combinations
(as defined in IFRS 3) are expensed.
Subsequent expenditure is added to the investment property’s carrying
value, if it is probable that future financial benefits associated with the
expenditure will flow to the Group and the expense can be measured
reliably. Other maintenance costs are recorded through the income
statement in the period in which they are incurred. When investment
properties are disposed of, the difference between the net sales proceeds
and carrying amount is recognised through profit or loss.
Investment property is valued at each reporting date. The value is estimated by independent valuers. The valuation is based on the individual
property’s assumed future cash flows, and property values are arrived at
by discounting cash flows with individual risk-adjusted required rate of
return.
The required rate of return for each property is defined as being a longterm risk-free interest plus a property-specific risk supplement. The latter
is defined on the basis of the property segment to which the property
belongs, its situation, standard, occupancy rate, tenants’ financial reliability and remaining lease term. Known market transactions with similar
properties in the same geographical area are also taken into consideration.
Changes in fair value are recognised as “changes in the value of investment property”.
For properties where the Group is involved in constructing and/or
upgrading public infrastructure, and where the Group operates and
maintains the infrastructure for an agreed period of time, the infrastructure itself is not included in the Group’s accounts, but is instead treated
as a financial or intangible asset, depending on whether the Group has
a public liability to pay/guarantee cash flows. In those cases where the
Group has a contractual right to receive a specific amount or other financial asset from the public sector, in return for constructing or upgrading
and subsequently maintaining/operating the asset for an agreed period,
the infrastructure is deemed a financial asset as defined in IAS 39. If the
Group is entitled to charge users of a public asset that it has constructed/
upgraded, and it is responsible for maintaining and operating it for an
agreed period, the entitlement is deemed an intangible asset as defined
in IAS 38. The total amount recognised in income varies depending on
the use of the asset. The Group has three properties classified as financial
assets under IFRIC 12.
Property, plant and equipment
Property, plant and equipment are recognised at cost, less depreciation.
The acquisition cost includes costs directly related to acquisition of the
asset. Buildings under construction that do not qualify as investment
properties are recognised at historical cost, adjusted for write-downs. The
acquisition cost includes costs directly related to acquisition of the asset.
Subsequent expenditure is added to the asset’s carrying amount or
recognised separately, when it is probable that future financial benefits
attributable to the expenditure will flow to the Group and the expense
can be measured reliably. Amounts relating to replaced parts are recognised in the income statement. Other maintenance costs are recorded
through the income statement in the period in which they are incurred.
Sites that are not considered to be investment properties (and buildings
under construction) are not depreciated. Other assets are depreciated in a
straight line over their anticipated remaining useful life.
Non-current assets and groups of non-current assets and liabilities classified as held for sale are measured at the lower of their previous carrying
amount and fair value less costs to sell. Investments properties classified
as held for sale are measured at fair value in the same way as other investment properties.
Housing units being developed by the company for sale
Housing projects involve the development and construction of residential
housing, with individual units being handed over to the purchaser when
they are completed. During their construction these projects are classified
as current assets. When the homes are completed and handed over to
the buyer, the sales price and cost of construction are recognised in the
income statement.
Buildings under construction
For construction contracts where the design and delivery schedule have
been negotiated with the buyer, costs and revenues should be recognised
in the income statement in accordance with the percentage of completion method described in IAS 11. Sales of other property projects are
measured at cost and presented under stock. The sales price is recognised
in the income statement on handover.
Gains and losses on disposals are recognised through profit or loss, and
are calculated as the difference between the sales price and the carrying
amount at the time of disposal.
Borrowing costs
The borrowing costs for capital used to finance buildings under construction is capitalised under the asset in question. When calculating the
capitalised borrowing costs, the average interest rate on the company’s
debt portfolio over the course of the year is used, unless there is separate
financing for the specific project. In such cases the specific borrowing
cost for the loan in question is used. When calculating the average interest rate to be used for the capitalisation of borrowing costs, loans taken
out for specific projects are not included.
Non-current assets held for sale and discontinued operations
Non-current assets and groups of non-currents assets and liabilities
are classified as held for sale if their carrying amount will be recovered
through a sales transaction rather than through their continuing use.
This condition is regarded as met if the sale is highly probable and the
non-current asset (or groups of non-current assets and liabilities) is available for immediate sale in its present condition. The management must
be intending to sell the asset and must expect the sale to be completed
within a year of the balance sheet date.
INTANGIBLE ASSETS
Goodwill
Goodwill is the difference between cost and the fair value of the Group’s
share of net identifiable assets in the entity on the acquisition date.
Goodwill arising from the acquisition of subsidiaries is classified as an
intangible asset. For the purpose of impairment testing, goodwill is
allocated to the relevant cash flow generating units. Goodwill is allocated
to the cash flow generating units or groups of cash flow generating units
that are expected to benefit from the acquisition from which the goodwill
The remaining useful life, and residual value, is reassessed on each balance sheet date and changed if necessary. If the carrying amount of an
asset is higher than its recoverable amount, the value of the asset is written down to the recoverable amount.
54
arose. Goodwill is tested for impairment annually and is recognised at
cost less any impairment losses. Impairment of goodwill is not reversed.
Gains and losses on the sale of an operation include the carrying amount
of goodwill relating to the sold operation.
Goodwill arising from the purchase of shares in associates and jointly
controlled entities is included under the investment in the associate or
jointly controlled entity, and is tested for impairment as part of the carrying amount of the investment.
Software
Purchased software is recognised at cost (including expenditure on making programs operative) and is amortised over the expected useful life.
Expenses directly associated with the development of identifiable and
unique software owned by the Group and which is likely to generate
net financial benefits for more than one year are capitalised as intangible
assets, and are depreciated over the expected useful life. Expenses relating
to the maintenance of software are expensed as incurred.
Impairment of non-financial assets
Intangible assets with an uncertain useful life are not depreciated, and are
instead tested annually for impairment. Property, plant and equipment
and intangible assets that are depreciated are also tested for impairment if
there is any indication to suggest that future cash flows cannot justify the
book value of the asset. Write-downs are recorded through the income
statement as the difference between the carrying amount and the recoverable amount. The recoverable amount is the utility value or fair value,
whichever is the higher, less costs to sell. When testing for impairment,
non-current assets are grouped at the lowest possible level at which it is
possible to find independent cash flows (cash flow generating units). In
conjunction with each financial report, the company assesses whether
it is possible to reverse past write-downs of non-financial assets (except
goodwill).
FINANCIAL INSTRUMENTS
A financial instrument is defined as being any contract that gives rise to a
financial asset at one entity and a financial liability or equity instrument
at another entity. Financial instruments are recognised on the transaction
day, i.e. the day the Group commits to buying or selling the asset.
Financial assets are classified in the following categories: at fair value
through profit or loss, loans and receivables and available for sale.
inancial assets at fair value through profit or loss are assets held for tradF
ing purposes, and include derivatives. Loans and receivables are unquoted
non-derivative financial assets with fixed or determinable payments.
Financial assets available for sale are assets designated as available for sale
or assets that do not fit in any of the other categories, including minor
shareholdings.
Financial liabilities are classified as financial liabilities at fair value
through profit or loss and financial liabilities at amortised cost. Financial
liabilities at fair value through profit or loss comprise loans designated
at fair value upon initial recognition (fair value option) and derivatives.
Financial liabilities at amortised cost consist of liabilities that do not fit in
the category at fair value through profit or loss.
Financial assets and liabilities are classified upon initial recognition based
on their characteristics and purposes. In order to avoid accounting mismatch, Entra Eiendom has used the fair value option for the company’s
long-term debt used to finance the acquisition of investment properties
measured at fair value. Liabilities designated at fair value through profit
or loss are typically debt incurred to finance the acquisition of investment
properties measured at fair value.
Trade receivables and other financial assets
Trade receivables and other financial assets are classified as loans and
receivables and are measured at fair value upon initial recognition, and
thereafter at amortised cost. Interest is ignored if it is insignificant. A
provision for bad debts is recognised if there is objective evidence that the
Group will not receive payment in accordance with the original conditions. Any subsequent payments received against accounts for which a
provision has previously been made are recognised in the income statement. Trade receivables and other financial assets are classified as current
assets, unless they are due more than twelve months after the balance
sheet date. If so, they are classified as non-current assets.
Shares
Investment shares are measured at fair value on the balance sheet date
and are classified as available for sale. Changes in the value of shares are
recognised under other comprehensive income, unless the asset is written
down or sold. When shares that are available for sale are sold or written
down, the total adjustment in value that has been recognised in compre-
hensive income is reclassified through profit or loss. Previous write-downs
of shares are not subsequently reversed in the income statement. Each
balance sheet date, the Group assesses whether there is objective evidence
of a fall in the value of the investment shares. Write-downs may be
considered if there is an indication that the value of the asset is likely to
fall. Dividends and other distributions received in relation to investment
shares are recognised under other finance income when the entitlement
to receive a dividend arises (normally when the dividend is adopted by
the AGM).
Cash and cash equivalents
Cash and cash equivalents consist of bank deposits and other short-term,
highly liquid investments with an original term to maturity of no more
than three months.
Derivatives
The Group uses derivatives to manage its interest rate risk. Derivatives are
initially recognised at cost price on the date on which the contract was
signed, and subsequently at fair value. Gains or losses on re-measurement
at fair value are recognised in the income statement. Regular payments
are presented as interest and other finance expenses. Changes in the value
of the derivatives are presented under “adjustment to value of financial
instruments”.
The fair value of interest rate swaps is the estimated amount the Group
would receive or pay to redeem the agreements on the balance sheet date.
This amount will depend on interest rates and the agreements’ remaining
term to maturity. The derivatives are classified on the balance sheet as
other current liabilities or on a separate line as financial derivatives under
other non-current liabilities, depending on whether they are expected to
be redeemed under or over 12 months from the balance sheet date.
Trade payables and other non-interest-bearing financial liabilities
Trade payables and other non-interest-bearing liabilities are classified as
financial liabilities at amortised cost, and are measured at fair value upon
initial recognition, and subsequently at amortised cost using the effective
interest rate method. Interest is ignored if it is insignificant.
Interest-bearing liabilities that satisfy the criteria for using the fair value
option under IAS 39 are classified in the category at fair value through
profit or loss. Entra Eiendom uses the fair value option for interest-bear-
55
ing liabilities incurred to finance the acquisition of investment properties. Interest-bearing liabilities are recognised at fair value when the loan
is received. Subsequently loans are measured at fair value through the
income statement and are presented under net financial items. Ordinary
interest expenses are presented on the income statement under net financial items. Interest-bearing liabilities are classified as current liabilities
unless there exists an unconditional right to delay repayment of the debt
for more than 12 months from the balance sheet date. Accrued interest
that is due for payment within 12 months of the balance sheet date is
included in the fair value of loans on the balance sheet.
PENSIONS
The Group has pension schemes which are defined benefit plans. A
defined benefit plan is a pension arrangement which defines the pension
payment an employee will receive on retirement. The pension benefit
payable is dependent on a number of factors, such as the employee’s age,
number of years of membership of the Norwegian Public Service Pension
Fund and salary.
The recognised pension obligation relating to defined benefit plans is the
present value of the defined benefit on the balance sheet date less the fair
value of the plan assets, adjusted for unrecognised actuarial gains/losses
and changes to pension plans relating to past service. The pension obligation is calculated annually by an independent actuary using the projected
credit unit method. The present value of the defined benefit is determined by discounting estimated future payments using a discount rate
based on a 10-year government bond, plus consideration of the relevant
duration of the obligations.
Changes to benefits payable under the pension plan are measured
through profit or loss, unless the entitlements under the new pension
plan are contingent upon the employee remaining at the company for
a specific amount of time (the qualifying period). In such cases the cost
associated with the change to the plan is amortised in a straight line over
the qualifying period.
Actuarial gains/losses resulting from new information or changes to actuarial assumptions over and above the greater of 10 per cent of the value
of plan assets and 10 per cent of pension obligations are recognised in the
income statement over a period corresponding to the employees’ average
remaining service period.
Redundancy packages are payments made when a contract of employment is terminated by the Group before the normal retirement age or
when an employee voluntarily agrees to leave in return for such a payment. The Group expenses redundancy packages when it has a proven
obligation to either terminate the contract of current employees in
accordance with a formal, detailed plan that cannot be withdrawn by the
Group, or to make redundancy payments as a result of an offer made to
encourage voluntary redundancy.
Redundancy packages that are due for payment over 12 months after the
balance sheet date are discounted to their present value.
TAX
The tax expense consists of tax payable and deferred tax. Tax is charged to
the income statement, except where it relates to items that are recognised
directly in equity. In such cases, the tax is either recognised in comprehensive income or directly in equity.
Deferred tax is calculated using the liability method for all temporary
differences between the tax values and consolidated accounting values of
assets and liabilities. Any deferred tax arising from the initial reporting
of a liability or asset in a transaction which is not a business combination and which on the transaction date does not affect accounting or
tax results is not recognised in the balance sheet. Deferred tax is defined
using tax rates and laws which are enacted or likely to be enacted on the
balance sheet date, and which are expected to be used when the deferred
tax asset is realised or when the deferred tax is utilised.
In the event of adjustments to the value of investment properties,
deferred tax is calculated and adjusted at the nominal tax rate of 28 per
cent. For investment properties acquired through the purchase of shares
in property companies or not acquired through a business combination,
in the event of an adjustment in value, deferred tax is calculated on the
property’s fiscal value.
Deferred tax asset is recognised to the extent that it is likely that future
taxable profit will be available against which the temporary differences
can be offset.
In principle deferred tax is not calculated on temporary differences
arising from investments in subsidiaries and associates. This does not
apply in cases where the Group is not in control of when the temporary
differences will be reversed, and it is probable that they will be reversed in
the foreseeable future. Nor is a liability for deferred tax calculated upon
initial recognition of assets or liabilities obtained through an acquisition
of a subsidiary not classified as a business combination.
Income from the termination of lease contracts is recognised when the
lease contract ends.
PROVISIONS
The Group recognises provisions for lease agreements and legal requirements when a present, legal or constructive, obligation has arisen as
a result of a past event, it is likely that an outflow of resources will be
required to settle the obligation and its amount can be estimated reliably.
There is no provision for future bad debts.
Lease contracts for property, plant and equipment where the Group has
all of the risks and benefits of ownership are classified as finance leases.
Finance leases are recognised at the start of the lease term at the lower of
fair value and the present value of the minimum lease payments.
In cases where there are several obligations of the same nature, the likelihood of settlement is determined by assessing the group as a whole. A
provision for the group is recognised even if there is little likelihood of
settlement of the group’s individual elements.
Provisions are measured at the present value of expected payments to
settle an obligation. A discount rate before tax is used which reflects the
present market situation. Any increase in an obligation as a result of a
changed time value is reported under finance expense.
INCOME RECOGNITION
Operating revenue consists of rental income and other operating revenue.
Gains on the sale of properties are presented on a separate line. Rental
income encompasses the fair value of the payments received for services
that fall within the ordinary activities of the company. Rental income is
presented net of VAT, rebates and discounts. Shared costs are capitalised
alongside payments on account from tenants and therefore have no
impact on the income statement. Shared costs are settled after the
balance sheet date.
Rental income is recognised over the duration of the lease. If a rent
exemption is agreed, or if the tenant receives an incentive in conjunction
with the signing of the lease, the cost or loss of rent is spread over the
duration of the lease, and the resulting net rent is recognised in equal
instalments. The accrued loss of rent or costs are presented under other
receivables.
56
LEASE CONTRACTS
Lease contracts where a significant proportion of the risks and benefits of
ownership remain with the lessor are classified as operating leases. Rent
payments for operating leases (less any financial incentives given by the
lessor) are expensed in a straight line over the duration of the lease.
DIVIDENDS
Dividend payments to the company’s shareholders are classified as debt
from the date on which the dividend is adopted by the AGM.
CORRECTIONS TO PREVIOUS YEARS
Deferred tax has been wrong by NOK 30 million in previous years. This
error increases deferred tax and reduces equity at 1 January 2010, in
accordance with IAS 8.
CHANGES TO CLASSIFICATION
In 2011, Sørlandet Kunnskapspark Eiendom AS (previously Kristiansand
Kunnskapspark Eiendom AS) was reclassified from subsidiary to joint
venture, in keeping with a new interpretation of the shareholder agreement. The change has been implemented with retrospective effect. In
accordance with IAS 1, all comparable figures have been restated, and
the adjusted balance sheet at 1 January 2010 has been presented in the
annual report. The balance sheet at 31 December 2010 has been reduced
by NOK 102.1 million, and net deferred tax assets have been reduced by
NOK 4.0 million as a result of the reclassification. The pre-tax profit was
changed by NOK 1 million.
The Group has made a number of changes to the financial statements
compared with previous years. The most significant change is:
- Adjustment to the value of investment property and profit from
associates and jointly controlled entities are now included in the Group’s
operating profit.
The comparative figures have been restated accordingly.
NOTE 3 Financial risk management
The Group’s finance strategy shall ensure that the Group has financial flexibility and that it achieves competitive financial terms. The Group is exposed to various types of financial
risk. The Group’s finance policy, which is adopted by the Board of Entra Eiendom AS, provides a framework for financial management at the Entra Eiendom Group. The parent
company has operational responsibility for the Group’s financing activities. Entra’s exposure to risk is supposed to be limited, balanced and in line with the Group’s activities. Entra
has established an internal finance committee which is a forum for updates on and discussion of the macroeconomic climate, as well as for discussing the company’s financial risks
and opportunities. Long-term projections are made of financial developments as a component in the Group’s risk management, using a model with detailed assumptions concerning the Group’s financial performance, cash flow and assets. The projections take into account cyclical developments in the economy, financial parameters and the property market.
Simulations are drawn up for different development scenarios. The simulations provide good information for the Board and the executive management in their monitoring of
developments in central balance sheet figures and cash flow.
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its financial obligations when they are due. This includes the risk that financing will not be available at a reasonable
price. The Group aims to limit liquidity risk by obtaining capital from a wide range of sources, including various capital markets and several different lenders. It also aims to maintain a financial buffer by having committed credit facilities covering 100 per cent of the Group’s capital requirements over the next 12 months. The Group has arranged several longterm credit facilities, as described below. At 31 December 2011, the average weighted remaining term to maturity of the Group’s loans and credit facilities was 4.2 years (4.7 years).
The Group issues commercial paper in the market as part of the Group’s short-term and long-term financing. By definition, commercial paper has a maximum term to maturity of
12 months, and is therefore classified as a current liability. To protect itself against the liquidity risk associated with its use of commercial paper, the Group has set up credit facilities
with its banks. These facilities ensure that the Group will still be in a position to refinance its debt even if the market for commercial paper becomes unattractive, or if investors do
not have available liquidity.
Maturity structure of all financial liabilities
At 31 Dec. 2011
REMAINING TERM
Under 3 months
4-12 months
1-2 years
2-4 years
4-6 years
-
-
54.4
163.1
6-8 years
8-10 years Over 10 years
Total
3 385.0
100.0
1 750.0
-
100.0
519.0
5 854.0
173.1
173.3
97.7
46.8
44.5
94.5
847.3
Interest-bearing bank loans
- principal
- estimated interest
Bonds
- principal
-
670.0
-
1 425.0
500.0
325.0
-
1 100.0
4 020.0
4.6
181.8
158.9
251.3
184.7
137.7
101.6
457.4
1 478.1
800.0
2 000.0
-
-
-
-
-
-
2 800.0
26.6
68.3
-
-
-
-
-
-
94.9
Commercial paper
- principal
Financial instruments
- interest rate derivatives-estimated interest
Trade payables
Other financial liabilities
Total
62.0
80.6
138.2
200.7
153.6
89.7
36.0
-23.3
737.5
204.8
-
-
-
-
-
-
-
204.8
45.9
-
-
-
-
-
-
-
45.9
1 198.2
3 163.9
3 855.2
2 150.2
2 686.0
599.2
282.2
2 147.6
16 082.4
57
NOTE 3 Financial risk management (cont.)
At 31 Dec. 2010
REMAINING TERM
Under 3 months
4-12 months
1-2 years
2-4 years
4-6 years
42.7
6-8 years
Total
1 200.0
505.0
2 030.0
1 200.0
-
-
510.0
5 445.0
128.1
123.9
157.4
103.3
29.2
29.2
87.5
701.2
Interest-bearing bank loans
- principal
Bonds
- principal
-
-
670.0
1 425.0
-
500.0
325.0
1 100.0
4 020.0
3.7
179.2
182.9
310.9
184.7
161.2
119.7
508.2
1 650.4
1 900.0
750.0
-
-
-
-
-
-
2 650.0
13.4
53.4
-
-
-
-
-
-
66.8
Commercial paper
- principal
Financial instruments
- interest rate derivatives-estimated interest
Trade payables
Other financial liabilities
Total
81.4
105.6
174.2
288.4
200.2
117.7
50.4
-52.0
965.9
140.9
-
-
-
-
-
-
-
140.9
34.2
-
-
-
-
-
-
-
34.2
2 216.2
2 416.3
1 656.0
4 211.6
1 688.2
808.1
524.3
2 153.7
15 674.4
The table is based on undiscounted contractual cash flows. The maturity analysis is based on the earliest possible redemption for instruments where the counterparty has a choice as
to when to redeem the instrument. Estimated interest is based on the interest rate on the individual loan/instrument on the balance sheet date. In order to manage its liquidity risk,
the Group has available, undrawn credit facilities with Norwegian and international banks, as well as available liquid assets.
Undrawn credit facilities
At 31 Dec. 2011
TERM TO MATURITY
Under 3 months
4-12 months
1-2 years
2-4 years
4-6 years
6-8 years
Parent company's undrawn credit facilities
-
1 000.0
-
900.0
1 200.0
1 000.0
-
-
4 100.0
Total
Subsidiaries' undrawn credit facilities
-
-
270.0
-
-
-
160.0
-
430.0
Total undrawn credit facilities
-
1 000.0
270.0
900.0
1 200.0
1 000.0
160.0
-
4 530.0
Under 3 months
4-12 months
1-2 years
2-4 years
4-6 years
6-8 years
Parent company's undrawn credit facilities
-
700.0
1 000.0
720.0
1 000.0
1 000.0
-
-
4 420.0
Subsidiaries' undrawn credit facilities
-
-
-
-
-
-
-
21.0
21.0
Total undrawn credit facilities
-
700.0
1 000.0
720.0
1 000.0
1 000.0
-
21.0
4 441.0
At 31 Dec. 2010
TERM TO MATURITY
At 31 December 2011, the Group had NOK 17.1 (118.0) million of available liquid assets. See Note 15.
58
Total
Interest rate risk
Interest rate risk arises from the value of the portfolio’s fixed interest debt being affected by changes in the market interest rates. Interest rate risk can
affect the company’s cash flows and the market value of the company’s liabilities. The main purpose of the Group’s strategy to manage interest rate risk is
to ensure stable and predictable interest payments. A large proportion of the Group’s liabilities are subject to fixed interest rates (67 per cent). The Group
uses a variety of derivatives to optimise its portfolio for its interest rate fixing structure. The choice of interest rate structure is based on an evaluation of
the Group’s financial strength and ability to generate long-term, stable cash flow.
At 31 December 2011, the effective term to maturity of the Group’s interest rate hedging instruments was 3.4 (3.6) years. Nominal average interest rate
has remained stable and was 5.16 (5.15) per cent at year-end.
The table below shows the nominal value of outstanding current and non-current interest-bearing debt including derivatives.
Maturity structure of the Group’s exposure to nominal interest rate risk
At 31 Dec. 2011
Term to maturity
Percentage
Amount
At 31 Dec. 2010
Term to maturity
Percentage
Amount
31 Dec. 2012
31 Dec. 2013
31 Dec. 2015
31 Dec. 2017
31 Dec. 2019
31 Dec. 2021 31 Dec. 2021+
Up to 1 year
1-2 years
2-4 years
4-6 years
6-8 years
Total
33 %
14 %
11 %
15 %
12 %
9%
6%
100 %
4 184.0
1 750.0
1 350.0
1 950.0
1 550.0
1 150.0
760.0
12 694.0
31 Dec. 2011
31 Dec. 2012
31 Dec. 2014
31 Dec. 2016
31 Dec. 2018
31 Dec. 2020 31 Dec. 2020+
Total
Up to 1 year
1-2 years
2-4 years
4-6 years
6-8 years
30 %
8%
15 %
19 %
8%
11 %
9%
100 %
3 685.0
970.0
1 750.0
2 320.0
1 000.0
1 350.0
1 060.0
12 135.0
59
Sensitivity analysis for market interest rates
The table below shows the overall impact on the Group’s financing costs of a parallel shift in market rates for NOK of +/- 1 percentage point, based on
the Group’s debt portfolio and interest rate derivatives on the balance sheet date. The figures quoted for the change in the fair value of debt and derivatives reflect what the market value of the portfolio would be on the balance sheet date if the yield curve were 1 percentage point higher or lower, based on
discounted future cash flows from the various instruments.
Total change in profit/loss Change in the Group’s interest
(after tax)*
expense (annualised)
At 31 Dec. 2011
Market rates increase by 1 percentage point
Interest-bearing debt
Derivatives
Market rates decline by 1 percentage point
Change in the fair value of
bonds and derivatives
(after tax)
426.0
-23.7
89.8
-51.6
449.7
141.4
336.2
27.9
308.3
-491.4
-467.7
23.7
-107.9
51.6
-159.5
Derivatives
-359.8
-27.9
-332.0
388.8
-26.7
415.5
94.7
-47.3
142.0
294.1
20.6
273.5
-457.7
At 31 Dec. 2010
Market rates increase by 1 percentage point
Derivatives
Market rates decline by 1 percentage point
-431.0
26.7
-112.5
47.3
-159.8
Derivatives
-318.5
-20.6
-298.0
* A positive figure signifies an increase in profit after tax.
60
Key figures for the Group’s financial instruments
2011
2010
13 230.0
12 830.0
- Fixed-to-variable swaps**
3 570.0
3 570.0
- Variable-to-variable swaps
700.0
700.0
- Variable-to-fixed swaps
7 260.0
6 510.0
- Options or option-related products
1 700.0
2 050.0
Nominal value of interest rate derivatives on the balance sheet date**
of which
Range of fixed interest rates
From 2.94% to 6.195 %
From 3.284 % to 6.195 %
Index for variable rate instruments
NIBOR
NIBOR
Average fixed rate excl. futures contracts
5.16 %
5.11 %
Average fixed rate incl. futures contracts
5.16 %
5.11 %
769.5
697.5
Fair value of derivatives on the balance sheet date (NOK millions)
Change in fair value of bank loans over the year ***
Change in fair value of bonds over the year
40.0
-8.4
-158.7
-18.0
Change in fair value of interest rate derivatives over the year
-71.9
-70.9
Loan arrangement fees
-17.4
-16.1
-208.0
-113.4
Total change in fair value of financial instruments
**NOK 3,570 (3,570) million of swaps linked to the fixed-interest bonds issued by the Group are included in the volume of interest rate swaps. These
bonds are swapped to a variable rate in order to ensure that the Group is in a position to manage its interest rate fixing independently of the bonds.
The real volume used for interest rate fixing is therefore NOK 8,960 (8,640) million. NOK 7,260 (6,560) million of this consists of pure interest rate
swaps, whilst NOK 1,700 (NOK 2,050) million is interest rate options or option-related products. Option-related products are used either to put a
ceiling on parts of the Group’s future interest rate expenses, or to reduce the current interest rate on the portfolio by issuing options that expose the
company to a limited amount of risk. The majority of the Group’s option-related agreements are standard interest rate swaps where the bank has an
option to extend the maturity date of the contracts.
***Spreads on bank loans are included in market value calculations for 2010 and 2011. The agreed spreads on bank loans are considered to be below the
assumed market spreads on bank loans with an equivalent term to maturity and credit risk on the balance sheet date. The difference between the agreed
interest rate spreads and market spreads has been discounted over the loan’s term to maturity. This reduces the market value of the liability. If the market spread on loans to the Entra Eiendom Group gradually normalises, this will result in the market value of the Group’s debt approaching its nominal
value. In 2011 the market value of the Group’s bank loans fell by NOK 40 million, which also increased the profit by NOK 40 million.
61
Currency risk
Currency risk arises if exchange rate fluctuations would affect the Group’s cash flow and profit, and the values of its assets and liabilities. The Group shall
not take on any currency risk. Any foreign currency loans and associated interest payments shall be fully hedged to prevent any potential impact on profit,
cash flow and balance sheet values. At 31 December 2011 the Group had no currency exposure.
Credit and counterparty risk
Credit and counterparty risk arise if there is a risk that a counterparty will be unable to meet his obligations to Entra Eiendom AS, and if this would
result in the Group suffering a financial loss. Entra is dependent on its most important banks having the intention and ability to establish a long-term
business relationship. In order to limit the Group’s exposure to counterparty risk, the maximum exposure to any one counterparty is 30 per cent. Entra
Eiendom considers that the ability of creditors to behave predictably over the long term is often dependent on their creditworthiness, and the Group has
set minimum credit ratings for its creditors, in order to ensure that they are sufficiently creditworthy.
Capital management and solvency
The Group has a cautious finance policy and a relatively high equity ratio. The main purpose of the Group’s capital management is to maintain a good
balance between debt and equity, in order to maximise the value of the shares in the company, while also maintaining a good credit rating and obtaining loan terms with lenders that reflect the risk profile of the company. The Group has defined a target range for its equity ratio of 25-35 per cent over
the economic cycle. This means that the Group will normally aim for the median value of the target range, i.e. an equity ratio of 30 per cent. There are
covenants in the Group’s loan agreements that specify requirements in relation to the company’s financial strength. At 31 December 2011, there was a
solid buffer with respect to all such covenants.
62
NOTE 3-1 Categories of financial instruments
Loans and
receivables
Financial
assets
available for
sale
31 Dec. 2011
Financial
assets at
fair value
through
profit or loss
Total
Financial
liabilities at
fair value
through profit
or loss
Held for
trading
Held for
trading
Assets
Financial
liabilities at
amortised
cost
Total
Designated
upon initial
recognition
Liabilities
Financial investments
- shares
- other financial assets
-
0.4
-
0.4
1 107.1
-
-
1 107.1
- Interest-bearing non-current liabilities
-
9 086.3
-
9 086.3
- Interest-bearing current liabilities
-
3 616.5
-
3 616.5
Trade receivables
34.5
-
-
34.5
- Derivatives
769.5
-
-
769.5
Other current receivables
60.4
-
-
60.4
- Trade payables
-
-
204.8
204.8
48.3
-
-
48.3
- Other current liabilities
-
-
45.9
45.9
1 250.3
0.4
-
1 250.7
Total financial liabilities
769.5
12 702.8
250.6
13 722.9
Loans and
receivables
Financial
assets
available for
sale
Financial
assets at
fair value
through
profit or loss
Total
Financial
liabilities at
fair value
through profit
or loss
Financial
liabilities at
amortised
cost
Total
Total financial assets
31 Dec. 2010
Held for
trading
Held for
trading
Assets
Designated
upon initial
recognition
Liabilities
Financial investments
- shares
- other financial assets
-
0.4
-
0.4
1 168.2
-
-
1 168.2
- Interest-bearing non-current liabilities
-
8 491.3
-
8 491.3
- Interest-bearing current liabilities
-
3 513.2
-
3 513.2
Trade receivables
24.6
-
-
24.6
- Derivatives
697.6
-
-
697.6
33.2
-
-
33.2
- Trade payables
-
-
140.9
140.9
149.1
-
-
149.1
- Other current liabilities
-
-
34.2
34.2
1 375.1
0.4
-
1 375.5
Total financial liabilities
697.6
12 004.5
175.1
12 877.1
Total financial assets
63
NOTE 3-2 Fair value disclosures
The fair value of bank loans has been calculated based on the difference between contractual cash flows and cash flows calculated using market credit
spreads on the balance sheet date. The estimate of market credit spreads is based on the views of two different banks, and represents their estimate of the
price that Entra would have to pay for credit with an equivalent structure to its existing loans.
The fair value of both listed and unlisted bonds is set at the tax value (as determined by a committee appointed by the Norwegian Securities Dealers’
Association, www.nfmf.no).
The fair value of commercial paper is estimated as its nominal value, due to the short term to maturity.
The Group uses the following hierarchy to classify financial instruments, based on the valuation methods used to measure and disclose their fair value:
Level 1: Quoted (unadjusted) prices in active markets for identical assets and liabilities.
Level 2: Other techniques where all of the parameters that have a significant impact on measuring fair value are either directly or indirectly observable.
Level 3: Valuation techniques that use parameters that significantly affect the valuation, but which are not observable.
64
NOTE 3-2 Fair value disclosures (cont.)
Financial assets at fair value
31 Dec. 2011
Level 1
Level 2
Level 3
- equity instruments
0.4
-
-
0.4
Total
0.4
-
-
0.4
31 Dec. 2011
Level 1
Level 2
Level 3
- Derivatives
769.5
-
769.5
-
- Bank loans
5 738.3
-
-
5 738.3
- Bonds
4 096.1
-
4 096.1
-
- Commercial paper
2 848.5
-
2 848.5
-
20.0
-
-
20.0
13 472.3
-
7 714.0
5 758.3
31 Dec. 2010
Level 1
Level 2
Level 3
- equity instruments
0.4
-
-
0.4
Total
0.4
-
-
0.4
31 Dec. 2010
Level 1
Level 2
Level 3
Financial assets available for sale
Financial liabilities at fair value
Financial liabilities at fair value through profit or loss
- Other
Total
Financial assets at fair value
Financial assets available for sale
Financial liabilities at fair value
Financial liabilities at fair value through profit or loss
- Derivatives
697.5
-
697.5
-
- Bank loans
5 370.3
-
-
5 370.3
- Bonds
3 937.1
-
3 937.1
-
- Commercial paper
2 677.0
-
2 677.0
-
20.0
-
-
20.0
12 702.0
-
7 311.7
5 390.3
- Other
Total
65
NOTE 3-2 Fair value disclosures (cont.)
2011
Reconciliation of opening and closing fair value of
level 3 assets and liabilities
Financial assets
available for sale
2010
Financial liabilities at fair
value through profit or loss
Held for
trading
Designated upon
initial recognition
0.4
-
5 390.3
- of which changes in the value of financial instruments recognised in the income statement
-
-
Purchases/new borrowing
-
-
Sales/repayments
-
-
Change in accrued interest at 31 Dec.
-
-
0.4
-
Opening balance
Financial assets
available for sale
Financial liabilities at fair
value through profit or loss
Held for
trading
Designated upon
initial recognition
0.6
-
4 888.7
-40.0
-
-
8.4
1 609.0
-
-
930.0
-1 200.0
-0.2
-
-445.0
-1.0
-
-
8.2
5 758.3
0.4
-
5 390.3
Changes in financial liabilities
Closing balance
Level 3 financial liabilities at fair value through profit or loss consist of bank loans. Changes in fair value are mainly due to changes in credit markets over the course of the year. Market credit spreads for the
Group’s loans increased in 2011. This contributed to a reduction in the Group’s liabilities.
2011
Fair value
Information about the fair value of financial
assets measured at amortised cost
Associates
Financial assets – service concession arrangements (IFRIC 12)
Trade receivables
Closing balance
Carrying amount
2010
Fair value
Carrying amount
-
-
119.2
14.2
14.2
16.4
119.2
16.4
1 318.7
1 106.6
1 355.9
1 167.7
34.5
34.5
24.6
24.6
1 367.4
1 155.4
1 516.0
1 327.8
The fair value is the same as the carrying amount for jointly controlled entities and associates, as the interest rate is adjusted continuously and no changes in credit margins have been identified. Trade receivables
have a short anticipated term, so the fair value is the same as the carrying amount. For service concession arrangements, fair value has been set as the average of two external valuers’ estimates of the fair values of
the properties in question; see Note 4.
66
NOTE 3-3 Financial items
2011
2010
112.6
108.9
2.0
0.1
Total interest and other finance income
114.7
109.0
Interest expenses
644.0
623.3
- of which capitalised loan arrangement fees
-29.2
-26.7
91.2
1.4
Total interest and other finance expense
706.0
597.9
Average interest on capitalised loan arrangement fees
5.4 %
5.5 %
Interest income*
Other finance income
Other finance expense**
*Interest income includes the impact of IFRIC 12 on financial assets where the Group’s counterparty is the state. The effective interest rate based on the
asset’s cash flow is used to calculate the finance income for the period.
** Other finance expense in 2011 includes the impact of the write-down of the IFRIC 12 assets totalling NOK 87.5 million before tax. See Note 4.
67
NOTE 4 Critical accounting estimates and subjective judgements
Fair value of investment properties
Investment properties are measured at their fair value based on external, independent valuations.
Each quarter, all of Entra’s properties are valued by two independent, external valuers. The valuations at 31 December 2011 were carried out by Akershus
Eiendom AS and DTZ Realkapital Verdivurdering AS. The valuations are mainly based on the discounted cash flow method, which involves discounting
future cash flows over a specified period using an estimated discount rate and then adding the estimated residual value at the end of the period. Future
cash flows are calculated on the basis of cash flows from signed leases, as well as future cash flows based on an expected market rent at the end of the lease
terms. The fair value of investment properties is therefore mainly affected by expected market rents, discount rates and inflation. The market rent for
each property takes into account the property’s situation, standard and leases signed for comparable properties in the area. For the duration of existing
lease terms, the discount rate is mainly based on an assessment of the individual tenants’ financial solidity and classification. After the end of the lease
term, cash flows are discounted using a discount rate that takes into account the risk of not finding a tenant and location. Inflation is estimated using the
consensus of a selection of banks and official statistics.
When carrying out their valuations, the valuers receive comprehensive details of the lease contracts at the properties, floor space and details of any vacant
premises, and up-to-date information about all ongoing projects. Any uncertainties relating to the properties/projects and lease contracts are also clarified
verbally and in writing as and when required. The Group management performs internal controls to ensure that all relevant information is included in the
valuations.
The valuers perform their valuations on the basis of the information they have received, and estimate future market rents, yields, inflation and other relevant parameters. Each individual property is assessed in terms of its market position, rental income (contractual rents versus market rents) and ownership
costs, with estimates being made for anticipated vacancy levels and the need for alterations and upgrades. The remaining term of the lease contracts is also
assessed for risk, and any special clauses in the contracts are looked at. Each property is also compared with recently sold properties in the same segment
(location, type of property, mix of tenants, etc.).
The table below shows to what extent the value of the property portfolio is affected by inflation, market rents, discount rates (interest rates) and exit yields
(market yields), assuming that all other factors are equal.
Parameter
Change in %
Inflation
Change in value (NOK millions)*
+1%
219.4
Market rents
+ 10 %
1 707.0
Discount rate
+ 0.25 %
-492.1
Exit yield
+ 0.25 %
-365.3
* Estimates by DTZ Realkapital Verdivurdering in conjunction with valuations at 31 December 2011.
68
NOTE 4 Critical accounting estimates and subjective judgements (cont.)
Uncertainty surrounding estimates pursuant to IFRIC 12
IFRIC 12 has been implemented by Entra Eiendom AS retrospectively from 1 January 2010. IFRIC 12 regulates the building of public infrastructure by
private operators commissioned by public authorities. The infrastructure is also to be operated by the private sector for a period, although the public sector retains control of the residual value. Entra has three properties regulated by these rules.
The value of non-current receivables has been calculated using estimates to which uncertainty is attached. The uncertainty relates to future rent payments.
There is also uncertainty surrounding the property-specific estimates of future ownership costs, investments and purchase options.
As a result of changes in estimates linked to the fair value of financial assets, a write-down in the order of NOK 87.5 million before tax was made in
the fourth quarter of 2011, at the same time as NOK 9.9 million of provisions for maintenance of properties has been reversed. The net effect of these
changes in estimates amounts to NOK 55.8 million after tax.
NOTE 5 Segment information
The Group management assesses the business based on geographical regions. The geographical regions share similar characteristics, so the Group considers
that under IFRS 8 it has only one reportable segment.
NOTE 6 Major transactions
There were no major transactions in 2011 and 2010.
69
NOTE 7 Intangible assets
Options
Other intangible
assets
Total intangible
assets
3.5
30.5
34.0
-
9.6
9.6
3.5
40.1
43.6
Accumulated depreciation and write-downs 1 Jan. 2011
-
21.5
21.5
Depreciation
-
5.7
5.7
Accumulated depreciation and write-downs 31 Dec. 2011
-
27.1
27.1
3.5
13.0
16.5
2011
Acquisition cost at 1 Jan. 2011
Acquisitions
Acquisition cost at 31 Dec. 2011
Carrying amount at 31 Dec. 2011
Anticipated useful life
5 years
Depreciations schedule
Linear
Goodwill
Options
Other intangible
assets
Total intangible
assets
15.7
3.5
21.0
40.3
-
-
9.5
9.5
15.7
3.5
30.5
49.8
17.6
17.6
Depreciation
-
-
3.9
3.9
Write-downs
15.7
-
-
15.7
15.7
-
21.5
37.2
-
3.5
9.1
12.6
2010
Acquisitions*
5 years
Depreciation schedule
Linear
* Acquisitions in 2010 include a NOK 1.9 million correction in relation to previous years.
Other intangible assets relate to capitalised IT investments.
70
NOTE 8 Investment properties
Value of investment properties
Opening balance 1 Jan.
Reclassification*
2011
2010
20 024.1
18 859.2
-
-107.9
20 024.1
18 751.4
Net change in fair value recognised in the income statement
632.6
526.6
Adjustment to value of investment property
632.6
526.6
127.4
244.5
1 110.1
714.7
Adjusted opening balance 1 Jan.
Other movements
New acquisitions
Improvements
Capitalised loan arrangement fees
Disposals
Closing balance 31 Dec.
Of which investment properties held for sale
Investment property
29.2
26.7
-43.0
-239.8
21 880.4
20 024.1
36.5
68.5
21 843.9
19 955.6
*In 2011, Sørlandet Kunnskapspark Eiendom AS (previously Kristiansand Kunnskapspark Eiendom AS) was reclassified from subsidiary to jointly
controlled entity.
Investment properties held for sale comprise 2 (4) investment properties for which the sales process had started, but not been completed, on the balance
sheet date. Assuming that acceptable offers are received, the properties are expected to be sold within 12 months. In 2011, the Group has identified a new
investment property held for sale.
For information about valuations and fair value calculations for investment properties, see Note 4 (Critical accounting estimates and subjective
judgements).
NOTE 9 Housing units being developed by the company for sale
Housing units being developed by the company for sale comprise homes developed by Brekkeveien 8 AS, a subsidiary of Ribekk AS. The company was
sold on 30 June 2010, and the Group therefore has no houses currently under development at 31 December 2011.
71
NOTE 10 Other property, plant and equipment
Acquisitions
Disposals
Other property, plant
and equipment
Total other property,
plant and equipment
7.5
69.2
76.7
-
14.2
14.2
-
-22.6
-22.6
7.5
60.7
68.2
1.3
29.0
30.3
Depreciation
0.2
6.3
6.6
1.5
35.3
36.8
6.0
25.4
31.4
20-50 years
1-5 years
Linear
Linear
Other property, plant
and equipment
Total other property,
plant and equipment
7.5
44.1
51.6
Acquisitions
-
25.3
25.3
Disposals
-
-0.3
-0.3
7.5
69.2
76.7
1.1
22.4
23.5
Depreciation
0.2
6.5
6.8
1.3
29.0
30.3
6.2
40.2
46.4
20-50 years
1-5 years
Linear
Linear
72
NOTE 11 Subsidiaries
Subsidiary
Oslo Z AS
Biskop Gunnerusgt. 14 AS
Universitetsgaten 2 AS
Kunnskapsveien 55 AS
Entra Kultur 1 AS
Kristian Augustsgate 23 AS
Nonnen Utbygging AS
Langkaia 1 AS
Kjørboparken AS
Ribekk AS
Bispen AS
Pilestredet 28 AS
Hagegaten 24 AS
Hagegaten 23 AS
Stakkevollveien 11 AS
Holtermannsveg 1-13 AS
Karoline Kristiansen vei 2 AS
Youngskvartalet AS
Greenfield Datacenter AS
Brødrene Sundt Verktøimaskinfabrik AS
Tullinkvartalet AS
Papirbredden Eiendom AS
Brattørkaia AS
Acquisition date
20.09.2000
26.03.2001
03.09.2001
17.12.2001
28.02.2002
01.02.2003
10.02.2003
21.11.2003
21.12.2005
02.10.2006
24.10.2007
07.05.2008
01.10.2008
07.07.2010
12.03.2010
22.09.2010
15.02.2011
10.05.2011
26.09.2011
03.10.2011
21.11.2011
10.01.2005
31.01.2006
Business office
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Shareholding/voting rights
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
60 %
52 %
Shares in subsidiaries owned through subsidiaries
Grønland 51 AS
Kreftingsgate 33 AS
Grønland 56 AS
Grønland 58 AS
Grønland 60 AS
04.02.2005
30.12.2010
12.01.2011
12.01.2011
12.01.2011
Drammen
Drammen
Drammen
Drammen
Drammen
100 %
100 %
100 %
100 %
100 %
Brattørkaia AS
Brattørkaia 14 AS
Brattørkaia 15AB-16 AS
Brattørkaia 17A AS
Brattørkaia 17B AS
31.01.2006
31.01.2006
31.01.2006
31.01.2006
Trondheim
Trondheim
Trondheim
Trondheim
100 %
100 %
100 %
100 %
Ribekk AS
Ringstabekk AS
30.06.2006
Oslo
100 %
In 2011 Entra Eiendom AS sold its 58.3 per cent holding in Optimo Prosjekt AS for NOK 23.2 million. The sale resulted in a gain for the Group of
NOK 2 million. At the time of the sale, Optimo Prosjekt AS had cash and cash equivalents of NOK 38.7 million.
73
NOTE 12 Jointly controlled entities and associates
Investments in associates and jointly controlled entities are recognised using the equity method.
Acquisition
date
Business
office
Shareholding/
voting rights
Sørlandet Kunnskapspark Eiendom AS**
04.07.2005
Kristiansand
51.00 %
10.0
-0.3
0.2
UP Entra AS
31.12.2003
Hamar
50.00 %
107.3
1.8
-1.9
Oslo S Utvikling AS
01.07.2004
Oslo
33.34 %
372.5
-27.8
-3.0
Ullandhaug Energi AS
07.07.2009
Stavanger
44.00 %
6.1
0.6
-
Kunnskapsbyen Eiendom AS
31.12.2004
Oslo
33.75 %
5.7
-2.8
-1.6
Tverrforbindelsen AS
24.04.2009
Trondheim
33.33 %
0.3
-
-
Youngstorget Parkeringshus AS
16.11.2005
Oslo
21.26 %
0.1
-
-
502.0
-28.4
-6.3
31 Dec. 2011
Carrying
amount
Share of Of which changes in
profit/loss value under IFRS*
Associate
Total for jointly controlled entities and associates
Acquisition
date
Business
office
Shareholding/
voting rights
Sørlandet Kunnskapspark Eiendom AS**
04.07.2005
Kristiansand
51.00 %
7.7
2.0
UP Entra AS
31.12.2003
Hamar
50.00 %
105.4
1.8
1.3
Oslo S Utvikling AS
01.07.2004
Oslo
33.34 %
495.6
35.8
-0.5
07.07.2009
Stavanger
44.00 %
5.5
-0.9
-
31.12.2004
Oslo
33.75 %
8.5
3.6
2.7
24.04.2009
Trondheim
33.33 %
0.3
-0.1
-
16.11.2005
Oslo
21.26 %
0.1
-
-
623.1
42.2
2.7
31 Dec. 2010
Carrying
amount
Share of Of which changes in
profit/loss value under IFRS*
-0.8
Associate
* Changes in value under IFRS consist of changes in the value of property, loans and interest rate hedging instruments, plus calculated deferred tax on the changes.
**In 2011, Sørlandet Kunnskapspark Eiendom AS (previously Kristiansand Kunnskapspark Eiendom AS) was reclassified from subsidiary to joint venture, in keeping with a new
interpretation of the shareholder agreement. According to the shareholder agreement, strategic and operational decisions must be unanimous among the shareholders. It also
requires proportional representation on the Board and rotation of the role of the chair of the board among the shareholders.
74
NOTE 12 Jointly controlled entities and associates (cont.)
Movement in carrying amount of jointly controlled entities and associates
Carrying amount
at 31 Dec. 2010
Share of profit/
loss for 2011
Dividend
2011
Capital
contributions
Carrying amount
at 31 Dec. 2011
7.7
-0.3
-
2.6
10.0
UP Entra AS
Sørlandet Kunnskapspark Eiendom AS
105.4
1.8
-
-
107.3
Oslo S Utvikling AS
495.6
-27.8
-95.3
-
372.5
Associate
5.5
0.6
-
-
6.1
8.5
-2.8
-
-
5.7
0.3
-
-
-
0.3
0.1
-
-
-
0.1
623.1
-28.4
-95.3
2.6
502.0
Aggregate financial information about associates and joint ventures
(Figures stated refer to Entra’s ownership interest)
Operating revenue
Profit Total assets Equity Total liabilities 75
2011
2010
85.6
210.6
-17.9
58.5
1 798.9
1 373.9
379.0
489.3
1 419.9
884.7
INFORMATION ABOUT MAJOR PROJECTS THROUGH OSLO S UTVIKLING AS (OSU)
Oslo S Utvikling AS (OSU) is a property development company established for the purpose of developing properties at Bjørvika, Oslo. OSU is jointly controlled by the Group, and
is accounted for using the equity method. At 31 December 2011, OSU was on course to develop approx. 300,000 square metres, which is around one-third of the total area being
developed at Bjørvika. OSU’s most important projects are described below.
Completed projects
The PwC building was sold in February 2006 (forward contract), and was completed in December 2007. The gain on the sale has previously been recognised in the income statement. A number of minor matters linked to the sale have still to be clarified and settled.
2011 saw the completion of the Visma building, which was sold in February 2006 (forward contract) for a gross price of NOK 920 million (value of property). The gain on the sale,
taking into account the seller’s future commitments, was recognised in 2011.
The KLP building was completed in spring 2010, and the office premises were handed over to the buyer, KLP. The residential units in the building were also completed in 2010, and
were handed over during the year. At the close of the year, one flat, which is used as a show home for potential buyers in the Opera quarter, remained unsold.
Current projects under development
At 31 December 2011, roughly 90 per cent of the Deloitte Building (total floor space of approx. 16,000 square metres) has been leased, and Deloitte has rented the entire office
section. At 31 December 2011, purchase contracts have been signed for approx. 75 per cent of the project. The cellar structures underneath the building have been completed. Work
above ground started in summer 2011, and is due for completion at the end of 2013.
For the three commercial buildings known as the DNB buildings, lease contracts for approx. 80,000 square metres had been signed at 31 December 2011. The buildings are due for
completion in 2012-2013. The lease term is 15 years, with options to extend the contract or purchase the buildings. OSU has signed contracts to sell the areas leased to DNB, with
handover as the individual building is completed. See Note 30 for further details.
The OSU subsidiary Barcode Basement AS is a separate company that owns, and which is developing and building, all of the underground areas in the Barcode zone (gross volume
70,000 square metres, just over 50 per cent of which Basement will be responsible for), and the business will lease out storage, car parking spaces and plant/plant rooms for the
buildings above. At year-end 2011, the areas from the western limit (under the PwC Building) and east as far the Visma Building have been completed and leased. The remaining
areas will be completed over the period 2012-2014.
76
Infrastructure projects
OSU owns 34 per cent of Bjørvika Utvikling/Bjørvika Infrastruktur. These companies are mainly involved in building infrastructure at Bjørvika, with an estimated cost of
NOK 2,000-2,500 million. The costs are covered by developers, who pay a fixed amount per square metre of development, as well as by a contribution of NOK 300 million from
the City of Oslo. Payments are due at certain milestones, with 30 per cent due when work above ground level starts, 50 per cent on completion of the buildings’ structures, and 20
per cent on their completion. The infrastructure contributions have been incorporated into the cost estimates for the various buildings. All infrastructure is to be transferred to the
City of Oslo free of charge.
Contractual obligations
All contractual obligations on the balance sheet date that have not been capitalised are included in the table below.
31 Dec. 2011
31 Dec. 2010
1 492
1 308
Total obligations contracted
1 492
1 308
NOTE 13 Other non-current receivables
Financial assets – service concession arrangements (IFRIC 12)*
2011
2010
1 106.6
1 167.7
0.8
0.9
1 107.5
1 168.5
Total other non-current receivables
* NOK 87.5 million in financial assets – service concession arrangements (IFRIC 12) was written down in 2011. See Note 4 for further details.
77
NOTE 14 Current receivables
2011
2010
Trade receivables
40.7
25.6
Provisions for bad debts
-6.2
-1.0
Net trade receivables
34.5
24.6
105.6
41.5
Total current receivables
140.1
66.1
At 31 December 2011, NOK 24.9 (18.3) million in trade receivables were overdue. Provisions for a loss of NOK 6.2 (1.0) million have been made for
overdue trade receivables. One tenant owes a total of NOK 4.2 (3.3) million. The Group is in talks with this tenant to find a solution. The remaining
trade receivables relate to various customers with good credit histories. The aged analysis of these trade receivables is as follows:
2011
2010
Up to 3 months
Trade receivables
7.7
10.4
Over 3 months
17.3
8.0
Total overdue
24.9
18.3
2011
2010
Shared costs to be distributed amongst tenants
Advance payments and accruals
-
2.6
51.5
8.3
VAT owed
10.3
5.3
Accrued interest
22.6
19.6
21.2
5.7
105.6
41.5
Total other current receivables
78
NOTE 15 Bank deposits
2011
2010
Bank deposits
17.1
118.0
Tied bank deposits
31.2
31.1
Total bank deposits
48.3
149.1
Tied bank deposits relate to the withholding tax account and guarantees for loans.
NOTE 16 Share capital and shareholder information
The Group has paid-in equity of NOK 1,414.2 million, consisting of NOK 142.2 million in share capital and NOK 1,272 in share premium reserve.
There have not been equity transactions with the shareholders in the parent company in 2011.
The share capital of NOK 142,194,000 consists of 142,194 shares with a face value of NOK 1,000. All shares enjoy equal rights. All of the shares are
owned by the Norwegian Government through the Ministry of Trade and Industry.
The shareholder has indicated that Entra Eiendom AS will pay a dividend of NOK 137 million for 2011 (NOK 963.5 per ordinary share). No provision
is made for dividends in the consolidated accounts until the AGM has been held and the dividend has been decided. In 2011, Entra Eiendom AS paid
the adopted dividend for 2010 of NOK 124.6 million (NOK 876.3 per ordinary share).
NOTE 17 Pension liabilities
The Group has pension schemes that cover a total of 153 current employees and 43 pensioners. The schemes provide an entitlement to defined future
benefits. These benefits are mainly dependent on number of years of contributions, salary level on reaching retirement age and the level of benefits from
the National Insurance Scheme. Commitments are covered through the Norwegian Public Service Pension Fund.
The Group also has a contractual early-retirement scheme (AFP). At 31 December 2011, 11 (11) former employees had chosen to make use of the AFP
scheme.
Entra Eiendom AS’s employees are members of the Norwegian Public Service Pension Fund. It is a defined benefit pension scheme that gives all
employees a guaranteed level of pension in the future. As a member of the Norwegian Public Service Pension Fund, the guaranteed pension level ensures
a defined pension benefit. The guarantee means that employees will receive at least 66 per cent of their pension qualifying salary. Any income over
and above 12 times the National Insurance Scheme’s basic amount is not included in the qualifying salary. The pension benefit payable is based on the
employee’s salary, average percentage of full-time equivalents and length of service (30 years’ service qualifies for a full pension). As a result of changes to
the way in which pension benefits in state-run pension schemes are indexed, a gain of NOK 7.6 million was recognised in the income statement in 2010.
79
NOTE 17 Pension liabilities (cont.)
Entra operates an early retirement pension scheme (AFP) from the age of 62. Employees can cut back on their working week or retire completely. If they
choose to cut back, they must continue to work 60 per cent of a full-time position. Between the ages of 62 and 65, pensions are calculated in accordance
with the National Insurance Scheme’s stipulations. On reaching the age of 65, the pension is calculated using either the National Insurance Scheme’s rules
or the Norwegian Public Service Pension Fund’s rules, depending on which is better for the member. At 31 December 2011, the net pension liabilities
associated with the AFP scheme amounted to NOK 17.8 (13.8) million, which is included under total pension liabilities in the table below.
Employees are also insured against incapacity and death.
The CEO has a separate pension plan that is discussed in Note 24. The company’s liabilities under this unfunded plan total NOK 8.1 million, and are
included in the table below.
The balance sheet liabilities have been calculated as follows
2011
2010
Present value of accrued pension liabilities in defined benefit schemes in unit trusts
176.3
134.8
Fair value of pension scheme assets
-85.8
-74.4
Unrecognised costs relating to pension liabilities accrued in previous periods
-17.3
9.7
Employers' NICs accrued
11.6
7.8
Net pension liabilities on the balance sheet at 31 Dec.
84.9
77.9
Change in defined benefit pension liabilities over the year
2011
2010
Pension liabilities at 1 Jan.
134.8
133.4
20.3
16.5
Present value of pensions earned this year
Interest expense
Life expectancy adjustment 1943-1953 cohorts
Change to indexing of retirement pension
4.7
5.6
-
-0.4
-
-6.2
Actuarial losses/(gains)
20.8
-10.3
Pension benefits paid
-4.3
-3.8
176.3
134.8
Pension liabilities at 31 Dec.
80
Change in fair value of pension scheme assets
Pension scheme assets at 1 Jan.
Anticipated return on pension scheme assets
2011
2010
74.4
66.5
4.4
3.9
Actuarial (gains)/losses
-2.8
-2.7
Contributions from employer
14.1
10.5
Pension benefits paid
-4.3
-3.8
Pension scheme funds at 31 Dec.
85.8
74.4
Total cost recorded through the income statement
2011
2010
20.3
16.5
Cost of pension benefits accrued during current period
Interest expense
4.7
5.6
-4.4
-3.9
Life expectancy adjustment 1943-1953 cohorts recognised in income statement
-
-0.5
Change to indexing of retirement pension recognised in income statement
-
-7.1
Administrative expenses
0.3
0.3
Employers' National Insurance Contributions
2.5
2.3
Total
23.3
13.2
2 per cent employee pension contributions
-1.8
-1.4
0.1
0.4
21.6
12.2
Expenses related to separate defined contribution scheme for employees at subsidiaries
Total expenses, included under personnel costs
The actual return on pension plan assets was NOK 1.6 (1.2) million.
2011
2010
Discount rate
The following economic assumptions have been used
2.60 %
4.00 %
4.10 %
5.60 %
Annual wage growth
3.50 %
4.00 %
Annual adjustment to the National Insurance Scheme's basic amount ("G")
3.25 %
3.75 %
Annual adjustment of pensions
2.50 %
3.00 %
Mortality rates
K2005
K2005
Disability rates
200% K1963
200% K1963
40 %
40 %
Proportion of entitled employees making use of AFP
81
Distribution of the pension scheme assets by investment category at 31 Dec.
2011
2010
100 %
100 %
Corporate bonds
0%
0%
Shares
0%
0%
Property
0%
0%
Other
0%
0%
Total
100 %
100 %
Government bonds
Amounts for the current year and for the four previous years
2011
2010
2009
2008
2007
Gross defined benefit pension scheme liabilities
176.3
134.8
133.4
121.4
111.6
Fair value of pension funds 31 Dec.
-85.8
-74.4
-66.5
-59.8
-53.2
90.5
60.4
66.9
61.6
58.4
Net defined benefit pension scheme liabilities
Sensitivity analysis for the assumptions used to calculate pension assets and liabilities
Discount rate
Impact on
Impact as a
liabilities
percentage
9.5 %
0.5 percentage point reduction
2.10 %
15.9
Discount rate at 31 Dec. 2011
2.60 %
-
-
0.5 percentage point increase
3.10 %
-13.9
-8.3 %
Impact on
Impact as a
liabilities
percentage
-4.2 %
Wage growth
0.5 percentage point reduction
3.00 %
-7.0
Expected wage growth at 31 Dec. 2011
3.50 %
-
-
0.5 percentage point increase
4.00 %
6.9
4.1 %
Expected payment to the defined benefit pension plan for the period 1 January 2012 to 31 December 2012 is NOK 15.8 million.
NOTE 18 Other liabilities
2011
2010
Provisions for non-current liabilities
34.6
46.4
Other non-current liabilities
29.2
28.1
Total other liabilities
63.8
74.5
82
NOTE 18 Other liabilities (cont.)
Movements in provisions for non-current liabilities
2011
Provision for rent Provision for maintenance
Other
Total
payments/loss-
- service concession
provisions
making contracts
arrangements (IFRIC 12)
22.7
23.4
0.4
0.9
5.4
-
6.2
-
-
-0.1
-0.1
-8.8
-9.9
-
-18.8
0.9
-
-
0.9
15.6
18.8
0.3
34.6
Other
Total
Movements in provisions
Opening balance at 1 Jan. 2011
Additional provisions during the year
Provisions used during the year
Unused provisions reversed during the year
Discounting of provisions
Closing balance at 31 Dec. 2011
Provision for rent Provision for maintenance
2010
payments/loss-
- service concession
making contracts
arrangements (IFRIC 12)
46.4
provisions
Movements in provisions
Opening balance 1 Jan. 2010
31.2
-
3.9
-
23.4
0.4
23.7
-8.5
-
-3.9
-12.4
-1.4
-
-
-1.4
1.4
-
-
1.4
22.7
23.4
0.4
46.4
Discounting of provisions
35.0
Provisions for properties leased by Entra
At 31 December 2011, Entra Eiendom had made provisions for rent payments for the following properties: Drammensveien 130, Oslo; Akersgata 55,
Oslo; Apotekergata 8, Oslo; Kristian Augustgate 19, Oslo and Dronningensgate 10-14, Oslo.
An assessment is made of the relationship between the rent paid by Entra Eiendom and the rental income that can be achieved by leasing out these
premises. This assessment is based on the rental cost and rental income specified in current leases, as well as an evaluation of future rental income for
vacant premises and for contracts that are expiring.
For properties leased by Entra, the company calculates the net cash flow over the duration of the lease contract. The present value of future cash flows is
calculated using a discount rate of six per cent.
In the accounts, a provision is made at 31 Dec. equal to the estimated present value. Changes in the present value in relation to the previous year are
recorded through the income statement.
More detailed explanation of the provision for maintenance under IFRIC 12
The contracts that the Group has signed with Vøyenenga School, Borgarting Court of Appeal and the National Library specify that the Group undertakes
to maintain the buildings. A regular provision is therefore made in accordance with IAS 37 to cover future maintenance requirements.
83
NOTE 19 Interest-bearing debt and accrued interest
Nominal value 2011
Market value 2011
Nominal value 2010
Market value 2010
Bank loans
Non-current interest-bearing liabilities
5 854.0
5 717.8
4 685.0
4 588.8
Bonds
3 350.0
3 368.5
4 020.0
3 882.5
-
-
20.0
20.0
Other liabilities
Total non-current interest-bearing liabilities
Current interest-bearing liabilities
9 086.3
Nominal value 2011
Market value 2011
Nominal value 2010
Market value 2010
-
20.5
760.0
781.5
670.0
727.6
-
54.7
2 800.0
2 848.5
2 650.0
2 677.0
20.0
20.0
-
-
Bank loans
Bonds
Commercial paper
Other liabilities
Total current interest-bearing liabilities
Accrued interest on which is included current
interest-bearing liabilities
8 491.3
3 616.5
3 513.2
Nominal value 2011
Market value 2011
Nominal value 2010
Market value 2010
Bank loans
20.5
20.5
21.5
21.5
Bonds
54.9
54.9
54.7
54.7
Commercial paper
48.5
48.5
27.0
27.0
123.8
123.8
103.2
103.2
Total accrued interest on interest-bearing liabilities
The average risk premium on the Group’s loans at 31 Dec. 2011 was 0.5 per cent.
84
NOTE 19 Interest-bearing debt and accrued interest (cont.)
The Group’s bonds and commercial paper are subject to the following terms
The Group’s bonds at 31 Dec. 2011
Issue limit
Coupon rate
Term to maturity
Amount issued*
Repurchased*
NO0010273386
ISIN
1 500.0
4.10 %
22.06.2012
670.0
-
Net balance*
670.0
NO0010552441
1 500.0
3M Nibor+0.80%
25.11.2014
450.0
-
450.0
NO0010552458
1 500.0
4.95 %
25.11.2014
975.0
-
975.0
NO0010592363
1 500.0
4.70 %
06.12.2017
500.0
-
500.0
NO0010552466
1 500.0
5.55 %
25.11.2019
325.0
-
325.0
NO0010282031
1 100.0
4.62 %
29.05.2030
1 100.0
-
1 100.0
4 020.0
The Group’s commercial paper at 31 Dec. 2011
Issue limit
Coupon rate
Term to maturity
Amount issued*
Repurchased*
NO0010607195
ISIN
400.0
3.26 %
10.02.2012
400.0
-
Net balance*
400.0
NO0010604895
400.0
3.30 %
09.03.2012
400.0
-
400.0
NO0010607229
400.0
3.35 %
10.04.2012
400.0
-
400.0
NO0010614266
400.0
3.41 %
10.05.2012
400.0
-
400.0
NO0010623325
400.0
3.66 %
08.06.2012
400.0
-
400.0
NO0010626799
400.0
3.35 %
10.08.2012
400.0
-
400.0
NO0010628779
400.0
3.35 %
10.09.2012
400.0
-
400.0
2 800.0
The Group’s bonds at 31 Dec. 2010
Issue limit
Coupon rate
Term to maturity
Amount issued*
Repurchased*
NO0010273386
ISIN
1 500.0
4.10 %
22.06.2012
670.0
.
Net balance*
670.0
NO0010552441
1 500.0
3M Nibor+0.80%
25.11.2014
450.0
.
450.0
NO0010552458
1 500.0
4.95 %
25.11.2014
975.0
.
975.0
NO0010592363
1 500.0
4.70 %
06.12.2017
500.0
.
500.0
NO0010552466
1 500.0
5.55 %
25.11.2019
325.0
.
325.0
NO0010282031
1 100.0
4.62 %
29.05.2030
1 100.0
.
1 100.0
4 020.0
* face value
85
NOTE 19 Interest-bearing debt and accrued interest (cont.)
The Group’s commercial paper at 31 Dec. 2010
Issue limit
Coupon rate
Term to maturity
Amount issued*
Repurchased*
NO0010564966
ISIN
400.0
3.05 %
10.01.2011
300.0
-
Net balance*
300.0
NO0010564388
400.0
2.49 %
10.02.2011
150.0
-
150.0
NO0010566730
400.0
3M Nibor+0.35%
10.03.2011
400.0
-
400.0
NO0010583198
400.0
3.15 %
11.04.2011
350.0
-
350.0
NO0010589922
400.0
2.85 %
10.05.2011
400.0
-
400.0
NO0010577190
400.0
3.15 %
10.06.2011
300.0
-
300.0
NO0010591258
500.0
2.70 %
11.08.2011
400.0
-
400.0
NO0010585409
400.0
3.15 %
09.09.2011
350.0
-
350.0
2 650.0
* face value
Mortgages
In general the Group’s financing is based on the parent company borrowing from external parties using negative pledge clauses. Wholly-owned subsidiaries are generally financed using intra-group loans.
For projects/properties with special characteristics, separate mortgage-based financing can be arranged. At 31 December 2011, a long-term bond of NOK
1,100 million is secured against the National Library and associated buildings, located at Henrik Ibsens gate 110 in Oslo. The lender also has a mortgage
on the rental income from the property.
For subsidiaries that are not wholly-owned by Entra Eiendom AS, in general separate financing is arranged without any guarantee from the shareholders.
This kind of financing is generally secured with a mortgage.
Market value of liabilities secured through mortgages
2011
2010
2 290.7
2 043.2
3 074.6
2 693.5
Carrying amount of mortgaged assets
Buildings and sites
86
NOTE 20 Trade payables and other liabilities
Trade payables
Holiday pay owed
Unpaid government taxes and duties
Shared costs for buildings, owed to tenants
Other liabilities
Total trade payables and other liabilities
2011
2010
204.8
140.9
11.8
10.0
9.5
12.3
20.4
4.5
4.2
7.4
250.6
175.1
2011
2010
NOTE 21 Prepayments and provisions
Prepayments from customers
Provisions for current liabilities
Total prepayments and provisions
105.8
94.6
19.1
24.9
124.9
119.5
Total
Movements in provisions for current liabilities
2011
Provisions for salaries and fees
Other
Opening balance at 1 Jan. 2011
11.3
13.6
24.9
22.7
-
22.7
-14.9
-13.6
-28.5
-
-
-
19.1
-
19.1
Provisions for salaries and fees
Other
Total
9.7
45.0
54.8
11.3
13.6
24.9
2010
Opening balance 1 Jan. 2010
-5.5
-45.0
-50.5
-4.2
-
-4.2
11.3
13.6
24.9
87
NOTE 22 Lease contracts
The Group mainly enters into contracts with a fixed rent for the lease of property.
The Group’s future accumulated rent from non-terminable operational lease contracts at 31 December
2011
2010
≤ 1 year
1 540.9
1 494.3
1 year ≤ 5 years
5 083.6
5 070.3
≥ 5 years
8 628.1
8 872.3
15 252.6
15 437.0
Total*
The Group’s lease contracts at 31 December have the following maturity structure measured in annual rent**
2011
Remaining term
2010
No. of contracts
Rent
%
No. of contracts
Rent
%
92
90.3
6%
96
78.1
5%
≤ 1 year
1 year ≤ 5 years
240
422.8
27 %
221
413.6
28 %
5 years ≤ 10 years
102
475.8
31 %
114
490.8
33 %
67
552.0
36 %
60
511.8
34 %
501
1 540.9
100 %
491
1 494.3
100 %
≥ 10 years
Total**
The table above shows the remaining non-terminable contractual rent for current lease contracts without taking into account the impact of any options.
* Rent includes rent from IFRIC 12 properties classified under net finance in the income statement.
** The rent is stated as the annualised contractual rent, and is therefore not reconcilable with the rental income for the year for accounting purposes.
Other parameters relating to the Group's contract portfolio
31 Dec. 2011
Vacancy rate of the management portfolio*
Share of public sector tenants
Weighted average remaining contract term
31 Dec. 2010
3.7 %
4.9 %
80.0 %
79.0 %
9.9 år
10.6 år
*In 2011 economic vacancy rate is stated in accordance with EPRA standards. In 2010, vacancy is based on floor space. Vacancy based on floor space in
2011 is 4.8 per cent.
On account of the high occupancy rate, the high proportion of public sector tenants and the relatively long average remaining contract term, the risk to
the Group’s cash flow is considered low.
88
NOTE 23 Other operating income
The Group mainly enters into contracts with a fixed rent for the lease of property.
Sales of maintenance services to tenants
2011
2010
11.4
12.5
Administrative mark-ups
8.4
7.8
Sale of services*
1.9
29.5
-
14.0
Sale of residential property**
Service concession arrangements (IFRIC 12) recognised in the income statement
Compensation paid to tenants on vacating premises
Total other operating revenue
8.6
8.1
-
6.0
2.9
2.3
33.1
80.2
* The sale of services relates to property development and project management in Optimo Prosjekt AS. The company was part of the Group until 25 May 2011.
** The residential project Brekkeveien 8 AS has been sold by the Group, and so this relates to revenues obtained up until the sale, which was completed on 30 June 2010.
NOTE 24 Personnel costs
Personnel costs
2011
2010
Wages, performance-related pay and other taxable benefits*
120.9
130.6
Employers' National Insurance Contributions
16.2
13.5
Pension expenses
21.6
12.2
Other personnel costs
9.5
8.2
Total personnel costs
168.2
164.5
Of which capitalised as buildings under construction
-7.5
-6.4
-41.6
-35.7
-6.2
-9.9
Total payroll and personnel costs
112.9
112.5
Number of employees/full-time equivalents
Of which shared costs to be distributed amongst tenants
Of which related to the ongoing operation of properties
2011
2010
Number of employees at 31 Dec.
155
166
Number of full-time equivalents at 31 Dec.
152
164
Average number of employees
160
167
*Wages, performance-related pay and other taxable benefits includes a NOK 15.3 (8.1) million provision for performance-related pay for all employees
in 2011, which has not yet been paid out.
89
NOTE 24 Personnel costs (cont.)
Statement on the determination of salaries and other remuneration of senior executives
The Board’s statement on the determination of salaries and other remuneration of senior executives is presented to the AGM and is included in the note
to the annual accounts on payroll expenses. The statement is structured as follows:
• General guidelines on the compensation of senior executives
• The board’s follow-up of senior executives’ pay
• Explanation of the compensation of senior executives
• Determination of salaries and other remuneration in 2012
• Overview of total remuneration to senior executives in 2011
General guidelines on the compensation of senior executives
The Norwegian Government has laid down guidelines for terms of employment for senior executives in state-owned enterprises and companies, cf. Report
no. 13 (2010-2011) to the Norwegian parliament (the Storting), Appendix 1. These guidelines form the foundation for the Board’s remuneration policy
at Entra Eiendom and provide guidance concerning recruitment and employment processes as well as in connection with the annual review of the salaries
of the Group’s senior management team and the CEO.
Compensation of senior executives is based on the Group’s general HR strategy and remuneration policy. Entra Eiendom wants to be a highly professional
organisation that attracts the best candidates and retains and develops employees. To this end, Entra needs to be able to offer good compensation packages, including competitive salaries, to ensure the company can recruit and retain attractive expertise. The guidelines on remuneration stress in particular
that the overall compensation shall be competitive, but not above those of other similar companies in Norway. The guidelines also state that the principal
element in the remuneration of senior executives should be the fixed basic salary and that all the individual components that make up the total remuneration package must be considered together as a whole. The targets linked to the company’s performance-related pay scheme shall be objective, measurable
and identifiable, and there must be a clear correlation between the company’s targets and the targets in the performance-related pay scheme.
The board’s follow-up of senior executives’ pay
The Board has established a compensation committee consisting of four representatives from the current Board of Directors to monitor and determine
the remuneration of the Group’s senior executives. The compensation committee is chaired by the Chair of the Board. The compensation committee
monitors the remuneration of senior executives in relation to the Government’s guidelines for terms of employment for senior executives in state-owned
enterprises and companies. The committee evaluates the company’s performance reward schemes and proposes guidelines for determining Group senior
executives’ compensation. The Board determines the Chief Executive Officer’s salary on an annual basis in light of a recommendation from the Board’s
compensation committee. The CEO consults the compensation committee in connection with determining the salaries of the members of the senior
management team.
Explanation of the compensation of senior executives
The fixed basic salary is the principal element in the remuneration of the Group’s senior executives and the Chief Executive Officer. In addition to the
basic salary, the CEO has a performance-related pay scheme limited to 50 per cent of his/her annual salary. The total performance-related pay for other
members of the senior management team cannot exceed 25 per cent of their annual salary. The CEO’s performance-related pay is based on predefined
targets regarding individual performance and company performance. The performance-related pay of Group directors is based on defined individual performance targets. In addition, the performance-related pay scheme for 2011 also includes company-level targets relating to return on equity, owner costs,
achieved rents, occupancy rate, customer satisfaction and energy consumption.
90
There are no share option schemes for key employees.
The CEO is entitled to receive his salary for 12 months after the termination of his contract, subject to certain limitations. In addition, the CEO is the
only member of the Group management to have an agreement concerning an additional pension, determined by his employment contract from 2008.
This pension scheme is a continuation of a pension agreement with a former employer. This scheme does not comply with the Government’s guidelines
on remuneration of senior executives. All other elements related to remuneration are in line with the guidelines. The CEO’s pension benefits on reaching
the age of 65 shall be equivalent to 66 per cent of his final salary less benefits from the National Insurance Scheme, the Norwegian Public Service Pension
Fund and pension benefits earned at other companies. The minimum qualifying period for the additional pension is five years. After five years, 1/19 of
the full pension rights are earned per year, based on his age on employment, until full pension entitlement is reached at the age of 65. The CEO can retire
at the age of 62, in which case he will receive 60 per cent of his final salary until the age of 65. In the event of suffering from a more than 50 per cent
long-term disability, the CEO is entitled to a disability pension. The benefit payable is 66 per cent of his final salary less benefits from the National Insurance Scheme, the Norwegian Public Service Pension Fund and pension benefits earned at other companies. The other members of the management group
have a defined benefit pension limited to 12 times the National Insurance basic amount (“12G”), in line with the other employees.
The company covers other benefits to the management team in line with the benefits offered to the other employees at Entra and in accordance with
standard practice at Norwegian companies.
The Chief Executive Officer and the rest of the management group have a number of internal directorships. They do not receive special remuneration for
these directorships.
Determination of salaries and other remuneration in 2012
The Board will use the same guidelines for compensation of senior executives in 2012 as it did in 2011. The Board determines the Chief Executive Officer’s salary, and the compensation committee is consulted in connection with determining the salaries of the other members of the senior management
team. The annual determination of pay for senior executives is based on assessment of the individual employee.
The company’s performance-related pay scheme was revised effective from the 2010 financial year. Under the new scheme, individual targets are set for
the Chief Executive Officer, based on the company’s strategy, targets and values. The company-wide targets have been updated for 2012, in accordance
with the Board’s annual review of the Group’s balanced scorecard and overall objectives for operations, and have been incorporated as part of the performance-related pay scheme for 2012. For the other members of the Group’s executive management, the 2012 performance-related pay scheme includes
both defined individual goals and performance targets for the business and support areas.
91
NOTE 24 Personnel costs
All amounts in NOK thousands
Overview of total remuneration to senior executives in 2011
PerformancePayments to leading employees
Salaries
related pay
Estimated
Total compen-
Total compen-
benefits in kind pension expense
Natural
sation 2011
sation 2010
Key employees
Kyrre Olaf Johansen, CEO
3 135
885
239
1 017
5 275
6 003
Rune Olsø, Deputy CEO since 10 May 2010
2 531
540
145
147
3 362
2 781
Anne Harris, CFO, joined the company 1 Oct. 2010
2 536
-
120
147
2 803
658
378
161
26
24
588
1 458
Sverre Vågan, Director of Human Resources, left the company 28 Feb. 2011
Nils Fredrik Skau, Technical Director
1 430
298
112
147
1 987
1 737
Bjørn Holm, Director of Projects and Development
1 531
326
138
147
2 143
1 847
Ingrid Schiefloe, Director of Communication and Corporate Social Responsibility
1 110
242
142
147
1 641
1 305
Anders Solaas, Director of Marketing, joined the company 16 Aug. 2010
1 416
13
174
147
1 749
612
14 066
2 465
1 096
1 921
19 548
16 401
Board
Committee
Total compen-
Total compen-
fees
fees
sation 2011
sation 2010
Total
The Board of Directors*
Grace Reksten Skaugen, Chair
366
39
405
392
Martin Mæland, Vice-chair
183
22
205
198
Finn Berg Jacobsen, Board member
183
55
238
228
Åse Koll Lunde, Board member up until 29 December 2011
183
39
222
198
Ottar Brage Guttelvik, Board member
183
22
205
213
Tore Bendiktsen, employee representative**
183
-
183
173
Mari Fjærbu Åmdal, employee representative**
183
-
183
173
1 464
176
1 640
1 575
Total
The above amounts are subject to National Insurance contributions of 14.1 per cent.
* The Board and committee members received no other compensation than what is set out in the table.
** Does not include ordinary salary.
The Group has a performance-related pay scheme that covers all employees. Payments are based on the results achieved by the Group, customer satisfaction and individual goals.
92
Auditor's fee
2011
2010
Legally required audit
1 450
1 800
Tax advice
63
170
Other services not related to auditing
295
513
Other auditing services
259
98
2 067
2 582
2010
Total auditor's fee (excl. VAT)
NOTE 25 Operating expenses
Operating expenses
2011
Administrative costs
38.5
33.5
Operating expenses
38.1
63.3
Other operating costs
11.9
15.5
Total other operating expenses*
88.6
112.2
* A total of NOK 2.2 (NOK 1.6) million of the total operating expenses are related to properties that do not generate any income.
NOTE 26 Other property costs
Other property costs
2011
2010
Rent paid by Entra Eiendom
59.3
74.5
Project operating expenses
32.7
17.6
Development costs
23.0
15.4
Depreciation and write-downs
12.3
26.4
127.2
133.9
Total other property costs
NOTE 27 Administrative owner costs
Administrative expenses
2011
2010
Payroll and personnel expenses
112.9
112.5
Office expenses, furnishings and equipment
22.3
21.3
Consultancy fees
33.5
24.7
Other administrative owner costs
17.2
28.7
Total administrative owner costs
186.0
187.2
93
NOTE 28 Tax
Deferred tax is stated net if the Group has a legal right to offset deferred tax assets against the deferred tax on the balance sheet, and if the deferred tax is
owed to the same tax authority. The following net value was recognised:
Deferred tax
Deferred tax assets
Net deferred tax
Change in deferred tax on balance sheet
Carrying amount at 1 Jan.
Recorded through profit and loss for the period
Loss carryforwards
Acquisition/disposal of subsidiaries
Carrying amount at 31 Dec.
2011
2010
2 887.2
2 494.9
534.7
370.6
2 352.5
2 124.3
2011
2010
2 124.3
1 877.7
234.2
245.3
-
0.5
-5.9
0.8
2 352.5
2 124.3
Change in deferred tax/deferred tax assets (not offset)
Deferred tax
Non-current assets*
Gains/losses
Total
2 150.7
41.2
2 191.9
293.3
8.8
302.1
0.8
-
0.8
2 444.8
50.0
2 494.9
415.1
-16.8
398.3
-5.9
-
-5.9
2 854.0
33.2
2 887.2
1 Jan. 2010
Recognised in income statement for the period
Acquisition and disposal of subsidiaries
31 Dec. 2010
Acquisition and disposal of subsidiaries
31 Dec. 2011
* The Group has applied the main rule for recognition of deferred tax in connection with the purchase of shares in property companies that are not
acquired through a business combination. This means that deferred tax is recognised as the difference between the tax value and consolidated accounting value of investment properties. Deferred tax linked to the retrospective accumulated change in the value of investment properties at 31 December
2011 is NOK 2,243.2 (1,944.9) million.
94
NOTE 28 Tax (cont.)
Provisions Financial instruments
Receivable
Loss carryforwards
Total
Deferred tax assets
1 Jan. 2010
34.2
91.5
0.1
190.1
315.9
-5.8
32.0
0.2
28.9
55.2
Loss carryforwards
-
-
-
-0.5
-0.5
Acquisition of subsidiaries
-
-
-
-
-
28.4
123.5
0.3
218.4
370.6
-
52.3
2.1
109.7
164.1
28.4
175.8
2.4
328.1
534.7
31 Dec. 2010
31 Dec. 2011
Tax payable is calculated as follows
2011
2010
Profit before tax
805.6
947.1
28.4
-42.2
Share of profit/loss at associates
Other permanent differences
6.2
12.5
Corrections to previous years
-4.1
-25.3
Changes in loss carryforwards
Changes in temporary differences*
391.8
101.2
-1 227.8
-982.0
Application of tax loss carryforwards
-
Profit for tax purposes
-
11.3
Tax payable on the balance sheet
-
3.2
Tax payable on the balance sheet
-
3.2
Applicable tax rate 28 per cent.
* The increase in temporary differences is largely due to an increase in the value of the Group’s properties.
95
NOTE 28 Tax (cont.)
The tax expense for the year is calculated as follows
Tax payable
Correction of deferred tax
2011
2010
-
3.2
-7.5
-
Change in deferred tax
234.1
245.3
Tax expense for the year
226.5
248.5
Reconciliation of tax expense with profit multiplied by nominal tax rate
2011
%
2010
%
Profit for accounting purposes multiplied by nominal tax rate
225.6
28.0 %
265.2
28.0 %
Tax on share of profit/loss at associates
8.0
0.1 %
-11.8
-1.2 %
Tax on permanent differences
1.7
0.0 %
3.6
0.4 %
Corrections to previous years
-8.7
-0.1 %
-7.1
-0.7 %
-
0.0 %
-1.4
-0.1 %
226.5
28.0 %
248.5
26.3 %
Tax on other changes
Tax expense for accounting purposes
NOTE 29 Related parties
Entra Eiendom AS is owned by the Norwegian government through the Ministry of Trade and Industry. Most of the company’s premises are leased to public-sector tenants. Lease
contracts are signed on commercial terms. NOK 1,154 million of the Group’s annual rental income is generated by leases where the state is the customer, through various ministries.
In 2011, the Group’s transactions and balances with jointly controlled entities and associates mainly related to loans and interest payments on loans. The aggregate figures are shown
in the table below.
Other interest received
2011
2010
2.3
13.8
Associates
1.0
0.9
Total rental income
3.3
14.7
Receivables
-
119.2
Associates
14.2
16.4
Total receivables
14.2
135.6
The agreement to purchase of the remaining 49 per cent of the shares in Ribekk AS of 15 June 2010 also included a clause on the property at Ringstabekkveien 105.
This clause was settled in 2011 by the Group paying the previous owners NOK 10.5 million.
96
NOTE 30 Events after the balance sheet date
In 2012 Oslo S Utvikling AS (33.33 per cent) has signed an agreement to sell all the buildings in the DNB project. The sale is based on a property value
of just under NOK 4.8 billion. Each of the buildings will be transferred on completion, and the first building, Midtbygget, is going to be handed over on
1 July 2012.
On 15 February 2012, Entra Eiendom and Oslo Pensjonsforsikring (OPF) signed an agreement for the establishment of a new jointly controlled property
company in Bergen. The property Allehelgens gate 6, which was included in the consolidated balance sheet at 31 December 2011 is being transferred in
connection with this transaction. The company will consist of the properties Lars Hilles gate 30 and Allehelgens gate 6.
NOTE 31 Earnings per share
Earnings per share are calculated as the profit for the year attributable to the shareholder of NOK 564.8 (737.2) million divided by the weighted average
number of outstanding shares over the course of the financial year, which was 142,194 (142,194).
There are no dilution effects, so the diluted earnings per share are the same as the earnings per share.
2011
2010
564.8
737.2
Average number of outstanding shares (Note 16)
142 194
142 194
Earnings per share (NOK)
3 972.0
5 184.7
Comprehensive income for the year attributable to shareholder (NOK millions)
NOTE 32 Cash flow from operating activities
Profit before tax
Loss/profit on the sale of shares and non-current assets
Loss/profit on the sale of other investments
Net expensed interest on loans from financial institutions
2011
2010
805.6
947.1
3.4
18.1
-
0.2
636.7
618.1
Accrued interest income
-4.0
-
Share of profit from associates and jointly controlled entities
28.4
-42.2
Ordinary depreciation
12.3
10.7
Write-downs of non-current assets
Non-cash impact of IFRIC 12
Adjustment to value of investment property
-
15.7
56.5
-18.8
-632.6
-526.6
Changes in the market value of financial derivatives
208.0
113.4
Changes in trade receivables
-36.6
-3.6
89.5
-57.0
Changes in trade payables
Difference between pension expense and payments into/out of pension schemes
Change in other accruals
97
-3.3
0.9
-10.8
69.9
1 153.1
1 145.9
“Entra is constantly developing new projects and new
business areas, in support of the company’s business
concept of adding value by developing, leasing and
operating attractive and highly eco-friendly premises.”
Annual financial statements
for Entra Eiendom AS
Entra Eiendom AS
Income statement 1 Jan.-31 Dec.
Note
2011
2010
Rental income
9
828 782
828 853
Gain on the sale of non-current assets
2
20 671
93 477
Operating revenue
17 760
17 440
Total operating revenue
867 214
939 770
Maintenance costs
44 690
52 551
Renovation costs
16 800
21 627
142 585
132 349
Operating expenses
2
Other operating expenses
393 045
294 554
Total operating expenses
7.10.11.14
597 120
501 080
Operating profit
270 094
438 690
118 324
-
Financial income and expenses
Income from investments in subsidiaries
Income from investments in associates and jointly controlled entities
95 300
-
210 966
219 666
Other interest received
5 066
16 959
Other financial income
7
13
Write-down of financial assets
-
-13 747
-519 859
-505 017
Interest income from Group companies
14
Interest paid
Other financial expenses
Net financial items
Profit before tax
Tax on profit
8
Profit for the year
-16 575
-41 348
-106 771
-323 475
163 323
115 214
19 390
43 164
143 932
72 050
137 000
124 600
6 932
-52 550
Distribution of the profit for the year
Dividends
Other equity
100
Entra Annual report 2011 Financial statements Entra Eiendom AS
- Assets
Note
2011
2010
Sites, buildings and other real property
2
6 438 233
5 637 636
Plant and machinery
2
40 902
25 942
Buildings under construction
2
485 750
847 994
6 964 885
6 511 572
Non-current assets
Total property, plant and equipment
Financial assets
Loans to Group companies
4
41 921
26 546
Investments in subsidiaries
3
1 386 071
1 282 903
3
454 052
448 781
4
11 761
133 190
Investments in shares/stakes
Receivables from Group companies
4,5
4
Total non-current financial assets
Total non-current assets
50
50
3 879 593
4 152 719
65 778
20 304
5 839 227
6 064 494
12 804 112
12 576 066
Current assets
Receivables
Trade receivables
5
17 551
19 254
Receivables from Group companies
5
130 327
110 030
Total receivables
Cash and bank deposits
6
Total current assets
Total assets
101
19 158
21 693
167 036
150 977
49 181
36 017
216 217
186 995
13 020 330
12 763 061
- Equity and liabilities
Note
2011
2010
EQUITY
Paid-in capital
Share capital
1
142 194
142 194
Share premium reserve
1
1 271 984
1 271 984
1 414 178
1 414 178
Total paid-in equity
Retained earnings
Other equity
1
Total retained earnings
Oslo, 28 March 2012
Total equity
1
507 594
500 662
507 594
500 662
1 921 772
1 914 840
Liabilities
Provisions
Chair of the Board
Martin Mæland
Vice-chair
Pension liabilities
7
48 149
43 099
Deferred tax
8
181 064
158 776
12
15 398
22 325
244 611
224 201
Other provisions
Total provisions
Ketil Fjerdingen
Board member
Finn Berg Jacobsen
Board member
Bonds
4
2 920 000
2 920 000
Liabilities to financial institutions
4
4 600 000
4 430 000
4
21 308
25 352
7 541 308
7 375 352
Total other non-current liabilities
Current liabilities
Board member
Ida Helliesen
Board member
Trade payables
5
121 847
95 005
Liabilities to group companies
5
15 305
191 707
9 371
8 153
1
137 000
124 600
4
2 800 000
2 650 000
13
229 116
179 203
3 312 638
3 248 668
Total liabilities
11 098 558
10 848 222
Total equity and liabilities
13 020 330
12 763 061
Taxes due
Dividends
Commercial paper
Other current liabilities
Mari Fjærbu Åmdal
Board member
Tore Benediktsen
Board member
Frode Halvorsen
Board member
Kyrre Olaf Johansen
102
Cash flow statement
Note
2011
2010
163 323
29 949
40
537 218
-520 561
142 585
1 703
26 841
5 049
-4 604
-213 624
-13 500
115 214
525
-93 477
22 388
526 388
-537 943
4 159
132 349
-12 477
-51 455
1 046
-18 647
49 402
154 420
137 474
47 590
-10 367
-641 891
-27 155
-104 131
-2 550
124 683
195 891
1 007
-15 032
95 300
260 611
-8
-536 947
-12 072
20 081
-209 452
-1 320
-45 150
151 294
-3 452
-
-336 656
-376 415
1 675 000
4 144 000
-1 505 000
-3 994 000
-124 600
2 540 500
3 515 000
-2 633 500
-3 050 000
-114 500
195 400
257 500
Net change in cash and cash equivalents
Cash and cash equivalents at the start of the year
13 164
36 017
18 559
17 459
Cash and cash equivalents at the end of the year
49 181
36 017
Cash flow from operating activities
Profit before tax
Tax paid for the year
Profit/loss on the sale of fixed assets
Profit/loss on the sale of shares
Net expensed Interest on loans from financial institutions
Interest paid on loans from financial institutions
Write-downs of shares
Changes in trade receivables
Changes in trade payables
Difference between pension expense and payments into/out of pension schemes
Accrued interest income
Items classified as investment or financing activities
Change in other accruals
2
2
7
Cash flow from investment activities
Sales of property, plant and equipment
Purchase of investment properties
Cost of upgrades to investment properties
Purchases of moveables, machinery and equipment
Sales of shares and stakes in other enterprises
Purchase of shares
Repayment of loans to associates and jointly controlled entities
Net change in cash pool balance of subsidiaries
Repayment of loans to subsidiaries
New loans to subsidiaries
Dividends from associates and jointly controlled entities
Net cash flow from investment activities
Cash flow from financing activities
New non-current liabilities
New current liabilities
Repayment of non-current liabilities
Repayment of current liabilities
Dividends paid
Net cash flow from financing activities
103
2
2
2
2
Accounting policies
The financial statements have been prepared in compliance with the Norwegian Accounting Act and generally accepted accounting principles.
General principles for measurement and classification of assets and
liabilities
Assets intended for long-term ownership or use are classified as noncurrent assets. Other assets are classified as current assets. Receivables
that are repayable within a year are classified as current assets. When
classifying current and non-current liabilities, equivalent criteria have
been applied.
Current assets are measured at the lower of cost and fair value.
Non-current assets are measured at cost, but are written down to their
recoverable value if the latter is lower than the carrying amount, and the
impairment is expected to be other-than-temporary. Non-current assets
with a limited useful life are depreciated according to a schedule.
Other non-current liabilities and current liabilities are measured at their
face value.
Subsidiaries, associates and jointly controlled entities
Investments in subsidiaries and jointly controlled entities are included in
the company accounts using the cost method. Investments are written
down to their fair value if the reduction in value is other-than-temporary
and the write-down appears to be necessary in accordance with generally accepted accounting principles. The same applies to investments in
associates.
Dividends and Group contributions from subsidiaries are recognised as
income from the investment in the subsidiary in the year that the allocation is made by the subsidiary. Dividends and Group contributions from
subsidiaries that exceed the retained earnings over the period of ownership are considered repayments of the acquisition cost.
Dividends from associates and jointly controlled entities are recognised as
income from the investment in the associates and jointly controlled entities in the year that the allocation is received. Dividends that exceed the
retained earnings over the period of ownership are considered repayments
of the acquisition cost.
Foreign currency
Monetary foreign currency items on the balance sheet are translated at
the exchange rate on the balance sheet date.
Rental income
Rental income is recognised when it is earned, i.e. over the course of the
lease term.
Lease contracts that are terminated are valued on an individual basis. Payments relating to the termination of contracts are recognised as income
to the extent that the company is able to re-let the premises to a new
tenant at a market rent. Such payments are accrued over the estimated
vacancy period if the premises remain vacant.
Pensions
Pension costs and pension liabilities are calculated using a linear accumulation model based on assumptions relating to discount rates, projected
salaries, the level of benefits from the National Insurance Scheme and
future returns on pension scheme assets, as well as actuarial calculations
of mortality, voluntary early retirement, etc. The net pension liability is
the difference between the present value of pension obligations and the
value of pension scheme assets allocated to pay for those benefits. Pension
scheme assets are measured at fair value. Changes in liabilities due to
changes in pension plans are allocated over the expected remaining contribution period. Actuarial gains and losses, and the impact of changes
to actuarial assumptions, are amortised over the remaining expected
contribution period if they exceed 10 per cent of whichever is greater of
the pension liabilities and pension scheme assets (the “corridor”).
104
Employers’ National Insurance Contributions are expensed on the basis
of the pension contributions made for secured (company) pension
schemes.
Tax
The tax charge on the income statement covers both tax payable for the
period and changes in deferred tax. Deferred tax is calculated at 28 per
cent on the basis of the temporary differences that exist between accounting and tax values, as well as any losses carried forward for tax purposes
at year-end. Temporary differences which increase or reduce tax and are
reversed or may be reversed in the same period have been eliminated. Net
deferred tax assets are shown on the balance sheet in so far as they are
likely to be utilised.
Tax on Group contributions that is recorded as raising the cost price of
shares in other companies, and tax on received Group contributions that
is recorded directly against equity, is entered directly against tax on the
balance sheet (the entry is made under tax payable if the Group contribution affects tax payable, and under deferred tax if the Group contribution
affects deferred tax).
Property, plant and equipment are recognised on the balance sheet and
are depreciated to a schedule over the anticipated useful life of the assets.
Direct maintenance of property, plant and equipment is recognised in
the income statement on an arising basis. Additions or improvements are
added to the asset’s cost price and are depreciated in line with the asset.
Maintenance costs for large rehabilitation projects are described as rehabilitation costs in the accounts. This is done to distinguish them from
ongoing, ordinary maintenance of the general management portfolio.
The portion of the rehabilitation costs for these projects that represents
additions or improvements is recognised on the balance sheet, whilst the
remainder is charged as an expense. The accounting implications of this
are described in Note 2.
Accounting policies (cont.)
Expenses related to construction projects are capitalised as buildings under construction. The financing costs for capital linked to the
development of non-current assets are recognised on the balance sheet
for accounting purposes, but are counted as an expense for tax purposes.
Projects are recognised on the balance sheet and depreciated from the
date of completion and when the non-current asset enters service.
Receivables
Trade receivables and other receivables are shown at nominal value after
provisions for anticipated bad debts. Provisions for bad debts are made
on the basis of individual assessments of the receivables.
Cash and cash equivalents consist of bank deposits and other short-term,
highly liquid investments with an original term to maturity of no more
than three months.
The company has an account in a Group cash pooling arrangement and
finances its subsidiaries’ liquidity requirements.
Contingent liabilities
The company has a certain number of lease agreements where it is the
tenant. These contracts are included in the letting activities. Under
Norwegian Accounting Standards on contingent liabilities and assets,
provision must be made for losses in the event that such premises remain
vacant or partially vacant. The company has calculated the necessary provision as of 31 December. The cost of leasing the premises, the duration
of the lease and the sub-lease’s value have been taken into account for the
calculation of the present value. Assumptions have also been made about
the letting of vacant properties using the estimated vacancy period. An
estimated rental price has been set based on lease agreements achieved.
Non-current liabilities
Non-current liabilities are shown on the balance sheet at nominal value
on the initial date. Premiums and discounts in connection with taking
on non-current liabilities, as well as arrangement fees, are accrued over
the period of the loan. Similarly, in the event of the repurchase of bonds,
premiums and discounts are accrued over the remaining term to maturity
for the relevant liabilities.
All of the company’s debt is subject to variable rates (including fixed rate
bonds, which are swapped to a variable rate). The company has then
used interest-rate swaps to convert its debt to fix-rate loans with varying
maturities. For information on maturities, please see Note 4. The company accrues these interest-rate swaps in such a way that the fixed rate is
expensed on the income statement. On the termination of interest-rate
swap agreements, the profit or loss is accrued over the remaining term to
maturity of the agreement in question.
The company has chosen to apply accounting principles which mean
that changes in the value of the company’s interest rate swaps are not
recognised in the income statement. Hedged items are carried at their
nominal value.
In general the Group’s financing is based on negative pledge clauses.
Entra Eiendom AS is the parent company of a group of companies. The
consolidated accounts can be obtained by writing to Entra Eiendom AS,
Postboks 52, Økern NO-0508 Oslo.
105
NOTE 1 Equity
Equity at 1 Jan. 2011
Share capital
Share premium reserve
Other equity
Total
142 194
1 271 984
500 662
1 914 840
Profit/loss for the year
143 932
143 932
Dividend appropriation
-137 000
-137 000
507 594
1 921 772
142 194
1 271 984
The share capital of NOK 142,194,000 consists of 142,194 shares with a face value of NOK 1,000. All shares enjoy equal rights. All of the shares are
owned by the Norwegian Government through the Ministry of Trade and Industry.
NOTE 2 Property, plant and equipment
Sites*
Buildings
Machinery, fix-
Art* Buildings under
tures and fittings
Total property,
construction* plant, equipment
540 912
6 017 387
80 453
5 906
847 994
10 367
1 004 085
27 155
-
616 735
1 658 342
Disposals
-27 588
-67 621
-322
-
-978 980
-1 074 512
523 690
6 953 851
107 285
5 906
485 750
8 076 482
Accumulated deprecation at 1 Jan. 2011
-
920 662
60 418
-
-
981 080
Depreciation for the year **
7
131 952
12 123
-
-
144 082
Disposals
-
-13 314
-252
-
-
-13 566
Accumulated deprecation at 31 Dec. 2011
7
1 039 300
72 289
-
-
1 111 597
523 683
5 914 550
34 996
5 906
485 750
6 964 885
Acquisitions
Balance sheet value as of 31/12/2011
69 år
50 år
3, 4, 10 år
Linear
Linear
Linear
7 492 652
Acquisitions of buildings includes NOK 19,469,232 of interest on capitalised construction loans. Gains on the sale of non-current assets totalled
NOK 20,671,425. Losses on the sale of non-current assets totalled NOK 50,620,883. The net gain amounted to NOK 29,949,458. In 2011 we sold six
properties. This year’s capitalised renovation costs total NOK 262,275,065.
*No depreciation is charged against sites and buildings under construction and art. The figure for depreciation of sites pertains to capitalised costs
linked to infrastructure on leased land.
** The difference between this year’s depreciation set out in the note and the total depreciation on the income statement is NOK 1,497,673.
Moveables have been included on the balance sheet if the depreciation is charged to joint tenant expenses on the balance sheet.
106
NOTE 3 – Subsidiaries, associates, etc.
Entra Eiendom AS
Investments in subsidiaries, associates and jointly controlled entities are recognised using the cost method.
Acquisition date
Business office
Shareholding and voting rights
Carrying amount
Oslo Z AS
20.09.2000
OSLO
100 %
80 000
Biskop Gunnerusgt. 14 AS
26.03.2001
OSLO
100 %
262 919
Subsidiary
Universitetsgaten 2 AS
03.09.2001
OSLO
100 %
215 212
Kunnskapsveien 55 AS
17.12.2001
OSLO
100 %
58 714
Entra Kultur 1 AS
28.02.2002
OSLO
100 %
1 275
Kristian Augustsgate 23 AS
01.02.2003
OSLO
100 %
68 963
Nonnen Utbygging AS
10.02.2003
OSLO
100 %
7 601
Langkaia 1 AS
21.11.2003
OSLO
100 %
20 060
Kjørboparken AS
21.12.2005
OSLO
100 %
62 025
Ribekk AS
02.10.2006
OSLO
100 %
193 119
100 967
Bispen AS
24.10.2007
OSLO
100 %
Pilestredet 28 AS
07.05.2008
OSLO
100 %
359
Hagegata 24 AS
01.10.2008
OSLO
100 %
14 563
Stakkevollveien 11 AS
12.03.2010
OSLO
100 %
15 907
Hagegata 23 Eiendom AS
29.03.2010
OSLO
100 %
94 643
Holtermanns veg 1-13 AS
24.09.2010
OSLO
100 %
10 303
Karoline Kristiansensvei 2 AS
15.02.2011
OSLO
100 %
8 789
Youngskvartalet AS
30.03.2011
OSLO
100 %
119
Brødrene Sundt Verktøimaskinfabrik AS
01.10.2011
OSLO
100 %
85 642
Greenfield Datacenter AS
26.10.2011
OSLO
100 %
120
10.01.2005
OSLO
60 %
60 686
Brattørkaia AS
31.01.2006
OSLO
52 %
24 087
1 386 071
107
NOTE 3 – Subsidiaries, associates, etc. (cont.)
Entra Eiendom AS
Investments in subsidiaries, associates and jointly controlled entities are recognised using the cost method.
Shareholding and
Carrying amount
Book equity
Profit/loss
at 31 Dec. 2011
after tax for 2011
Acquisition date
Business office
voting rights
Sørlandet Kunnskapspark Eiendom AS *
04.07.2005
Kristiansand
51.00 %
5 271
14 755
-920
UP Entra AS konsern
31.12.2003
HAMAR
50.00 %
31 297
121 230
7 429
Oslo S. Utvikling AS
01.07.2004
OSLO
33.33 %
406 621
899 465
-61 400
07.07.2009
STAVANGER
44.00 %
6 490
13 941
1 291
31.12.2004
OSLO
33.75 %
3 746
13 061
-3 488
16.11.2005
OSLO
21.26 %
463
107
-45
24.04.2009
TRONDHEIM
16.67 %
165
789
143
Associate
454 052
*In 2011, Sørlandet Kunnskapspark Eiendom AS (previously Kristiansand Kunnskapspark AS) was reclassified from subsidiary to joint venture, in
keeping with a new interpretation of the shareholder agreement.
NOTE 4 Receivables, liabilities and financial instruments
2011
2010
Proportion of receivables which fall due after more than one year
Loans to Group companies
Loans to Group companies (group cash pooling arrangement, non-current)
Options
42
27
3 880
4 153
4
4
12
133
Accrual of fees on financial instruments
62
17
3 999
4 333
Total non-current receivables
108
NOTE 4 Receivables, liabilities and financial instruments (cont.)
Maturity structure of non-current liabilities
Year
2011 Loan value
2010 Loan value
2011
-
1 204
2012
691
691
2013
2 750
2 030
1 425
2014
1 425
2015
100
-
2016
1 750
-
More than 5 years
825
2 025
7 541
7 375
2010 Loan value
Total
At 31 Dec. 2011, the maturity structure of the company’s new undrawn credit facilities was as follows:
Maturity structure of committed, undrawn credit facilities
Year
2011 Loan value
2011
-
700
2012
1 000
1 000
720
2013
-
2014
-
-
2015
900
1 000
2016
1 200
-
2017
-
-
2018
1 000
1 000
4 100
4 420
Total
Special terms and conditions in Entra Eiendom AS’s loan agreements
In general the Group’s financing is based on negative pledge clauses.
Loans and interest rate hedges
Interest rate hedging at Entra Eiendom AS is part of the Group’s overall risk management, and must be viewed in that context. The interest-rate position
should support the company’s strategic development, and should reflect the company’s risk profile and anticipated future market interest rates based
on the company’s interest rate view. The Group’s guidelines on managing interest rate risk are expressed as a preferred interest rate structure (standard
portfolio). The standard portfolio specifies the Group’s requirements with respect to the weighted term and time segments.
At 31 December 2011, the average remaining term of Entra Eiendom AS’s interest bearing liabilities was 3.4 years. The average interest rate on
Entra Eiendom AS’s portfolio of loans and interest-rate hedges was 5.27 per cent at 31 December 2011.
109
Entra Eiendom AS’s portfolio of loans and interest rate hedges has the following interest rate structure
2011 Loan value
2010 Loan value
Up to one year
39 %
4 070
4 250
1-2 years
11 %
1 150
300
2-4 years
13 %
1 300
1 500
4-6 years
14 %
1 450
1 650
6-8 years
9%
900
700
14 %
1 450
1 600
100 %
10 320
10 000
over 8 years
Total
The effect of interest rate hedges is shown in the income statement. The fair value of the company’s portfolio of interest rate hedges is not shown on the
balance sheet.
Interest-bearing liabilities associated with hedging activities
Entra Eiendom AS uses interest rate derivatives to manage the interest rate risk arising from its interest-bearing liabilities.
The company’s debt financing consists of bank loans, as well as commercial paper and bonds. The bank loans are subject to variable interest rates.
Commercial paper is subject to variable interest rates. The company has issued both fixed-rate and variable-rate bonds. Outstanding fixed-rate bonds are
hedged using fixed-to-variable interest rate swaps. As a result, the hedged bonds are classified as part of the company’s portfolio of variable rate loans.
The company’s exposure to variable interest rates is hedged for cash flow risk using variable-to-fixed interest rate swaps.
Cash flow hedging
Entra Eiendom AS’s liabilities are directly or indirectly subject to variable interest rates. Entra Eiendom AS uses variable-to-fixed interest rate derivatives
to manage the company’s interest rate risk. Cash flows are hedged by matching the terms and volumes of the interest rate derivatives with the expected
maturity profile of the company’s interest-bearing liabilities. The expected maturity profile of Entra’s interest-bearing liabilities is based on an assessment
of the need to refinance existing liabilities and to obtain additional financing.
The table below shows that after taking into account cash flow hedges, 76 per cent of the company’s interest-bearing liabilities are effectively subject to
fixed interest rates.
Changes in NIBOR rates will therefore affect the interest expense on 24 per cent of the company’s interest-bearing liabilities.
110
Cash flow hedging
2011
2010
10 320
10 000
Hedged item
Variable interest rate debt
Hedge
7 850
7 300
Hedge ratio (unhedged position)
Interest rate swaps (variable-to-fixed)
2 470
2 700
Hedge ratio (% hedged)
76 %
73 %
2011
2010
Changes in the cash flow hedges over the financial year:
Change in value
Opening balance – market value of liability
621
507
Change in value
204
114
Closing balance – market value of liability
825
621
The fair value of the company’s interest rate swaps used as cash flow hedges specifies the present value of the contractual fixed-interest rate agreements.
The present value represents the market value of company’s liabilities to the counterparty of the interest rate swaps. The change in value over the financial
year represents the change in the market value of liabilities. The reason for the increase in the market value of the company’s liabilities for the financial
year 2011 was falling market interest rates.
111
Fair value hedging
Entra Eiendom AS has the following fair value hedges for the company’s outstanding fixed-rate bonds:
Fair value hedging 2011
Total
Maturity structure
1-5 years
>5 years
Up to 1 year
Hedged item
Fixed interest rate debt
2 470
670
975
825
2 470
670
975
825
-
-
-
-
Maturity structure
1-5 years
>5 years
Hedge
Interest rate swaps (fixed-to-variable)
100 %
Fair value hedging 2010
Total
Up to 1 year
Hedged item
Fixed interest rate debt
2 470
-
1 645
825
2 470
-
1 645
825
-
-
-
-
Hedge
Interest rate swaps (fixed-to-variable)
100 %
Change in value
2011
2010
Opening balance – market value of liability
-24
19
Change in value
-51
-43
Closing balance – market value of liability
-75
-24
At 31 December 2011, the market value of the company’s fair value hedges amounts to a receivable.
112
NOTE 5 Intergroup balances
Receivables
2011
2010
Trade receivables
1 717
2 015
130 327
110 030
Non-current receivables from, and loans to, Group companies
Current receivables from, and loans to, Group companies
3 921 514
4 179 266
Total
4 053 558
4 291 311
Liabilities
2011
2010
Trade payables
2 159
7 814
Current liabilities to Group companies
15 305
191 707
Total
17 464
199 522
The company has established a Group cash pooling arrangement. It is the net bank deposits that are presented as Entra Eiendom AS’s cash at bank. In
2010 the company signed long-term loan agreements with its subsidiaries. Loans to subsidiaries are classified as current financial assets (short-term) and
non-current financial assets (long-term).
NOTE 6 Restricted assets
Cash in hand and at bank at the period end is shown on the cash flow analysis.
Tax withholding account
113
2011
2010
6 180
6 135
NOTE 7 Pensions
The company has pension schemes that cover a total of 153 current employees and 43 pensioners. The schemes provide an entitlement to defined future
benefits. These benefits are mainly dependent on number of years of contributions, salary level on reaching retirement age and the level of benefits from
the National Insurance Scheme. Commitments are covered through the Norwegian Public Service Pension Fund.
Entra Eiendom AS’s employees are members of the Norwegian Public Service Pension Fund. It is a defined benefit pension scheme that gives all
employees a guaranteed level of pension in the future. As a member of the Norwegian Public Service Pension Fund, the guaranteed pension level ensures
a defined pension benefit. The guarantee means that employees will receive at least 66 per cent of their pension qualifying salary. Any income over
and above 12 times the National Insurance Scheme’s basic amount is not included in the qualifying salary. The pension benefit payable is based on the
employee’s salary, average percentage of full-time equivalents and length of service (30 years’ service qualifies for a full pension). The company’s pension
scheme fulfils the stipulations of the Act on mandatory occupational pensions.
Entra operates an early retirement pension scheme (AFP) from the age of 62. Employees can cut back on their working week or retire completely. If they
choose to cut back, they must continue to work 60 per cent of a full-time position. Between the ages of 62 and 65, pensions are calculated in accordance
with the National Insurance Scheme’s stipulations. On reaching the age of 65, the pension is calculated using either the National Insurance Scheme’s rules
or the Norwegian Public Service Pension Fund’s rules, depending on which is better for the member. Employees are also insured against incapacity and
death.
The CEO has a separate pension plan that is discussed in Note 10. The scheme covers salary over and above 12 times the National Insurance Scheme’s
basic amount (“G”) in addition to the scheme with the Norwegian Public Service Pension Fund.
114
NOTE 7 Pensions (cont.)
Present value of pensions earned this year
Interest expenses on the pension liability
- Return on pension scheme assets
Change in estimate recognised in income statement
Administrative expenses – Norwegian Public Service Pension Fund
Employers' National Insurance contributions
Net pension expense Norwegian Public Service Pension Fund
2011
2010
15 549
11 951
5 001
5 806
-4 439
-3 900
1 850
142
284
255
2 312
1 990
20 557
16 242
Life expectancy adjustment, 1943-1953 cohorts, recognised in income statement
-
-392
Change to indexing of retirement pension, recognised in income statement
-
-5 558
-1 861
-1 453
870
3 000
19 567
11 838
2 per cent employee pension contributions
+ Year's change in liability for CEO's unfunded pension scheme
Pension expense for the year
31 Dec. 2011
31 Dec. 2010
Estimated pension liabilities at 31 Dec.
137 721
133 730
Pension scheme assets at 31 Dec.
-85 819
-74 356
Effect of actuarial gains/losses not charged to income
-15 178
-26 313
36 724
33 061
Net pension liabilities on balance sheet before employer's National Insurance contributions
5 178
4 662
Net pension liabilities after employer's NICs
41 902
37 722
Liability for CEO's unfunded pension scheme
6 247
5 377
48 149
43 099
Total net pension liabilities after employer's NICs
Assumptions
2011
2010
Discount rate
3,80 %
3,80 %
Anticipated salary increases
3,50 %
4,00 %
Anticipated pension increase
2,50 %
3,00 %
Anticipated adjustment to the National Insurance Scheme's basic amount ("G")
3,25 %
3,75 %
4,10 %
5,60 %
40,00 %
40,00 %
Disability table used
Anticipated take-up percentage for early retirement scheme (AFP)
200% K63
200% K63
Mortality table used
K2005
K2005
The actuarial assumptions are based on generally accepted assumptions in the insurance industry with regard to demographic factors.
115
NOTE 8 Tax
Tax for the year breaks down as follows
2011
2010
Excess provision in previous year (government stimulus package)
-
-525
Correction of deferred tax for last year
-
-490
Tax impact of Group contributions entered as investments
-2 897
-
-
1
Change in deferred tax
22 288
44 178
Total tax
19 390
43 164
163 323
115 214
10 348
1 745
Correction of permanent differences for last year
Calculation of the tax base for the year
Profit before tax
Group contributions received
Corrections to previous years not recognised in income statement
-
-3
Permanent differences*
-93 989
38 946
Basis for tax for the year
79 682
155 903
Net temporary differences
Change in differences included in the calculation of deferred tax
Tax base for the year
116
-82
1 876
-79 600
-157 779
-
-
NOTE 8 Tax (cont.)
Overview of temporary differences
Receivables
Non-current assets
Provisions in accordance with generally accepted accounting principles
Pensions
Gains and losses
Net temporary differences
Change
2011
4 171
-4 871
2010
-700
-319 325
1 188 418
869 093
-6 928
-15 398
-22 325
5 049
-48 149
-43 099
59 292
115 816
175 108
-257 740
1 235 816
978 076
Loss carried forward
178 141
-589 158
-411 017
Basis for deferred tax on the balance sheet
-79 600
646 659
567 059
28 % deferred tax
-22 288
181 064
158 776
Deferred tax/Deferred tax assets on the balance sheet
-22 288
181 064
158 776
Explanation of why tax for the year does not equal 28 per cent of profit before tax
28 % tax on profit before tax
Correction of deferred tax
2011
2010
45 730
32 260
-23
-
-26 317
10 904
Calculated tax
19 390
43 164
Effective tax rate
11.9 %
37.5 %
Permanent differences (28 %)*
* Includes non-deductible expenses, such as entertainment, gains on the sale of shares and write-downs of shares.
NOTE 9 Rental income
In 2001, Entra Eiendom AS established a new regional structure for follow-up and operation of the company’s properties. The geographical distribution
of the rental income is presented in keeping with the new structure.
Geographical distribution
Central Oslo
2011
2010
317 063
318 997
Greater Oslo
246 704
248 636
Southern and Western Norway
180 979
178 960
Central and Northern Norway
84 036
82 260
828 782
828 853
Total
117
NOTE 10 Payroll expenses, number of employees, remuneration, etc.
Payroll and personnel expenses
Salaries, fees, etc.
2011
2010
110 224
97 321
15 910
13 341
Pension expenses
19 567
11 639
Other expenses
Other personnel costs
Total
Of which capitalised as projects under development
Of which shared costs to be distributed amongst tenants
Of which related to the ongoing operation of properties
Total payroll and personnel costs
799
784
9 687
8 843
156 188
131 928
-7 660
-5 551
-38 148
-33 205
-8 468
-8 998
101 913
84 174
Over the year, on average 151 full-time equivalent staff worked at the company.
Statement on the determination of salaries and other remuneration of senior executives
The Board’s statement on the determination of salaries and other remuneration of senior executives is presented to the AGM.
The statement is structured as follows:
• General guidelines on the compensation of senior executives
• The board’s follow-up of senior executives’ pay
• Explanation of the compensation of senior executives
• Determination of salaries and other remuneration in 2012
• Overview of total remuneration to senior executives in 2011
118
NOTE 10 Payroll expenses, number of employees, remuneration, etc. (cont.)
General guidelines on the compensation of senior executives
The Norwegian Government has laid down guidelines for terms of employment for senior executives in state-owned enterprises and companies, cf. Report
no. 13 (2010-2011) to the Norwegian parliament (the Storting), Appendix 1. These guidelines form the foundation for the Board’s remuneration policy
at Entra Eiendom and provide guidance concerning recruitment and employment processes as well as in connection with the annual review of the salaries
of the Group’s senior management team and the CEO.
Compensation of senior executives is based on the Group’s general HR strategy and remuneration policy. Entra Eiendom wants to be a highly professional
organisation that attracts the best candidates and retains and develops employees. To this end, Entra needs to be able to offer good compensation packages, including competitive salaries, to ensure the company can recruit and retain attractive expertise. The guidelines on remuneration stress in particular
that the overall compensation shall be competitive, but not above those of other similar companies in Norway. The guidelines also state that the principal
element in the remuneration of senior executives should be the fixed basic salary and that all the individual components that make up the total remuneration package must be considered together as a whole. The targets linked to the company’s performance-related pay scheme shall be objective, measurable
and identifiable, and there must be a clear correlation between the company’s targets and the targets in the performance-related pay scheme.
The board’s follow-up of senior executives’ pay
The Board has established a compensation committee consisting of four representatives from the current Board of Directors to monitor and determine
the remuneration of the Group’s senior executives. The compensation committee is chaired by the Chair of the Board. The compensation committee
monitors the remuneration of senior executives in relation to the Government’s guidelines for terms of employment for senior executives in state-owned
enterprises and companies. The committee evaluates the company’s performance reward schemes and proposes guidelines for determining Group senior
executives’ compensation. The Board determines the Chief Executive Officer’s salary on an annual basis in light of a recommendation from the Board’s
compensation committee. The CEO consults the compensation committee in connection with determining the salaries of the members of the senior
management team.
Explanation of the compensation of senior executives
The fixed basic salary is the principal element in the remuneration of the Group’s senior executives and the Chief Executive Officer. In addition to the
basic salary, the CEO has a performance-related pay scheme limited upwards to 50 per cent of his/her annual salary. The total performance-related pay
for other members of the senior management team cannot exceed 25 per cent of their annual salary. The CEO’s performance-related pay is based on
predefined targets regarding individual performance and company performance. The performance-related pay of Group directors is based on defined
individual performance targets. In addition, the performance-related pay scheme for 2011 also includes company-level targets relating to return on equity,
owner costs, achieved rents, occupancy rate, customer satisfaction and energy consumption.
There are no share option schemes for key employees.
119
The CEO is entitled to receive his salary for 12 months after the termination of his contract, subject to certain limitations. In addition, the CEO is the
only member of the Group management to have an agreement concerning an additional pension, determined by his employment contract from 2008.
This pension scheme is a continuation of a pension agreement with a former employer. This scheme does not comply with the Government’s guidelines
on remuneration of senior executives. All other elements related to remuneration are in line with the guidelines. The CEO’s pension benefits on reaching
the age of 65 shall be equivalent to 66 per cent of his final salary less benefits from the National Insurance Scheme, the Norwegian Public Service Pension
Fund and pension benefits earned at other companies. The minimum qualifying period for the additional pension is five years. After five years, 1/19 of
the full pension rights are earned per year, based on his age on employment, until full pension entitlement is reached at the age of 65. The CEO can retire
at the age of 62, in which case he will receive 60 per cent of his final salary until the age of 65. In the event of suffering from a more than 50 per cent
long-term disability, the CEO is entitled to a disability pension. The benefit payable is 66 per cent of his final salary less benefits from the National Insurance Scheme, the Norwegian Public Service Pension Fund and pension benefits earned at other companies. The other members of the management group
have a defined benefit pension limited to 12 times the National Insurance basic amount (“12G”), in line with the other employees.
The company covers other benefits to the management team in line with the benefits offered to the other employees at Entra and in accordance with
standard practice at Norwegian companies.
The Chief Executive Officer and the rest of the management group have a number of internal directorships. They do not receive special remuneration for
these directorships.
120
Determination of salaries and other remuneration in 2012
The Board will use the same guidelines for compensation of senior executives in 2012 as it did in 2011. The Board determines the Chief Executive
Officer’s salary, and the compensation committee is consulted in connection with determining the salaries of the other members of the senior management team. The annual determination of pay for senior executives is based on assessment of the individual employee.
The company’s performance-related pay scheme was revised effective from the 2010 financial year. Under the new scheme, individual targets are set for
the Chief Executive Officer, based on the company’s strategy, targets and values. The company-wide targets have been updated for 2012, in accordance
with the Board’s annual review of the Group’s balanced scorecard and overall objectives for operations, and have been incorporated as part of the performance-related pay scheme for 2012. For the other members of the Group’s executive management, the 2012 performance-related pay scheme includes
both defined individual goals and performance targets for the business and support areas.
Overview of total remuneration to senior executives in 2011
Performance-
Benefits
Estimated
Total
Total
in kind pension expense
compensation
compensation
Salaries
related pay
3 135
885
Rune Olsø, Deputy CEO since 10 May 2010
2 531
540
145
Anne Harris, CFO, joined the company 1 Oct. 2010
2 536
-
120
378
161
26
24
Payments to senior executives and the Board of Directors
Kyrre Olaf Johansen, CEO
Sverre Vågan, Director of Human Resources,
left the company 28 Feb. 2011
239
2011
2010
5 275
6 003
147
3 362
2 781
147
2 803
658
588
1 458
1 017
Nils Fredrik Skau, Technical Director
1 430
298
112
147
1 987
1 737
Bjørn Holm, Director of Projects and Development
1 531
326
138
147
2 143
1 847
Ingrid Schiefloe, Director of Communication and
Corporate Social Responsibility
1 110
242
142
147
1 641
1 305
Anders Solaas, Director of Marketing,
joined the company 16 Aug. 2010
1 416
13
174
147
1 749
612
14 066
2 465
1 096
1 921
19 548
16 401
Total
121
Board fees
Committee fees
Grace Reksten Skaugen, Chair
The Board of Directors*
366
39
Total compensation
405
Martin Mæland, Vice-chair
183
22
205
Finn Berg Jacobsen, Board member
183
55
238
Åse Koll Lunde, Board member up until 29 December 2011
183
39
222
Ottar Brage Guttelvik, Board member
183
22
205
Tore Benediktsen, employee representative**
183
-
183
Mari Fjærbu Åmdal, employee representative**
183
-
183
1 464
176
1 640
Total
* The Board and committee members received no other compensation than what is set out in the table.
** Does not include ordinary salary.
The company has a performance-related pay scheme that covers all employees. Payments are based on the results achieved by the company (IPD), customer satisfaction and individual goals.
Fees are not paid to employees of Entra Eiendom AS for being directors of subsidiaries, etc.
Auditor's fee
Statutory audit
Other auditing services
Tax advice
Other services not related to auditing
Total auditor's fee (excl. VAT)
122
2011
2010
870
1 095
70
78
-
85
295
336
1 235
1 593
NOTE 11 Other operating expenses
2011
2010
Management, operation and development of properties
163 947
138 973
Payroll and personnel costs
101 913
84 174
Loss on the sale of non-current assets
50 621
-
Other administrative costs
76 564
71 406
393 045
294 554
Total other operating expenses
NOTE 12 Other provisions
2011
2010
Provision for rent payments
15 398
22 325
Total other provisions
15 398
22 325
123
NOTE 13 Other current liabilities
Prepayments from customers
2011
2010
94 086
70 352
Interest accrued
90 664
74 007
Wages and holiday pay owed
28 422
25 591
15 944
9 253
229 116
179 203
NOTE 14 Related party transactions
Entra Eiendom AS is owned by the Norwegian Government through the Ministry of Trade and Industry. Most of the company’s premises are leased to
public-sector tenants. Lease contracts are signed on commercial terms.
Related party transactions
Counterparty
2011
Rental cost
Subsidiary
16 950
General manager fees*
Subsidiary
5 156
Project management*
Subsidiary
4 158
Invoiced payroll expenses**
Subsidiary
36 596
Invoiced operating expenses**
Subsidiary
5 436
Interest income
Subsidiary
210 966
Interest income
2 331
Interest income
Associates
1 014
The Group’s balances with subsidiaries, jointly controlled entities and associates are described in Notes 4 and 5.
* The company recognises this income as a reduction in expenses (offsetting).
** Some of the expenses are passed on to the tenants as shared costs.
124
Auditor’s
report
Financial
calendar 2012
May 8 2012
Q1 2012
May 14 2012
Annual General meeting
August 21 2012 Q2 2012
November 6 2012
Q3 2012
127
Contact information
head office
cONTAcT
Address
Biskop Gunnerus gate 14 a
NO-0185 Oslo
Postboks 52, Økern
NO-0508 Oslo
Telephone: +47 21 60 51 00
Fax: +47 21 60 51 01
E-mail
[email protected]
www.entra.no
Anne Harris
CFO
E-mail [email protected]
Astrid Tveten
Director of Finance and Investment
Rina Brunsell Harsvik
Acting Director of Communication and CSR
128
Entra Annual report 2011 Contact information
www.entra.no

Entra Annual report 2011

Transcription

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